Importance The article discusses the origin and development of views on the economic substance of goodwill, goodwill valuation when planning mergers and acquisitions. In addition, the article addresses the recognition of goodwill in the financial statements of the acquiring company, and the subsequent accounting. The author identifies three stages of the evolution: pre-regulatory (1571-1929), regulatory (1929-1960s), harmonic (1970 up till the present days). Objectives In the article, the author considers the regulatory stage. The stage saw the segregation of two fundamentally different scientific approaches to the recognition and valuation of goodwill and translation of individual scientific schools' methodologies into the national accounting standards. The author describes and analyzes the most famous researchers' views of goodwill prevailing from the 1930s to 1960s. Results The author also points out the most important trends in the goodwill researches of the period, i.e. the transition from a thoughtful description of goodwill by revealing its economic nature and constituents to the procedural accountant's definition of goodwill through the valuation methods; generally accepted division of goodwill into acquired and internally generated one, without recognition of the internally generated goodwill in the balance sheet; the final formation of two main approaches to the subsequent accounting of goodwill: capitalization in the balance sheet without any further changes in value and write-off value for a limited period of time (usually through amortization). The article also considers the evolution of the basic regulatory documents of the period governing the goodwill accounting practices in the leading capitalist countries, i.e. USA, UK, Germany, France and Japan. The author explains the reasons for different trajectories of the regulatory goodwill accounting development in each of these countries. Conclusions and Relevance The article can be useful for those who are interested in the history of the goodwill concept, accounting and economic analysis.
Keywords: goodwill, business reputation, history, valuation, recognition, financial reporting, financial statements, accounting, economic analysis, mergers and acquisitions
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