What is the difference between purchased Goodwill and self generated Goodwill? How do we know whether the given Goodwill is self generated or purchased?
Dear Student,
Purchased Goodwill:- goodwill which is acquired by a firm for a consideration, whether paid in cash or kind.
Features:-
1. It arises on the purchase of a business .
2. It is shown as an asset in the balance sheet.
3. It is amortised at the earliest . AS-26,Intangible assets prescribes that normally tangible assets should be written off within 10 years.
Self-Generated or Non-Purchased Goodwill:-
Self-Generated goodwill is not purchased for a consideration but is earned by the efforts of the management. It is an internally generated goodwill which arises from a no. of factors that a running business possesses .
Features:-
1.It is generated internally , generally over the years.
2. Its valuation is subjective assessment of the valuer .
3. AS-26 prescribes that self-generated goodwill is not accounted as an asset.
Goodwill shown in balance sheet is purchased goodwill because self generated goodwill can not be quantified
Regards
Purchased Goodwill:- goodwill which is acquired by a firm for a consideration, whether paid in cash or kind.
Features:-
1. It arises on the purchase of a business .
2. It is shown as an asset in the balance sheet.
3. It is amortised at the earliest . AS-26,Intangible assets prescribes that normally tangible assets should be written off within 10 years.
Self-Generated or Non-Purchased Goodwill:-
Self-Generated goodwill is not purchased for a consideration but is earned by the efforts of the management. It is an internally generated goodwill which arises from a no. of factors that a running business possesses .
Features:-
1.It is generated internally , generally over the years.
2. Its valuation is subjective assessment of the valuer .
3. AS-26 prescribes that self-generated goodwill is not accounted as an asset.
Goodwill shown in balance sheet is purchased goodwill because self generated goodwill can not be quantified
Regards