Home  Journals  Economic Analysis: Theory and Practice  38(437) - 2015 October

Evolution of approaches to understanding the economic substance, assessment and recognition of goodwill in financial reporting: a harmonic stage

Vol. 14, Iss. 38, OCTOBER 2015

Article PDF Version

Received: 13 August 2015

Accepted: 26 August 2015

Available online: 24 October 2015

Subject Heading: HISTORY OF ECONOMIC ANALYSIS

JEL Classification: 

Pages: 49-64

Subject The article continues a series of publications addressing the origin and development of views on the economic substance of goodwill, its valuation at the stage of mergers and acquisitions planning. It considers the harmonic stage characterized by weakening the scholarly dispute on the economic nature of goodwill and increasing unification of approaches to goodwill recognition and valuation in national and international accounting standards.
     Objectives The aim is a retrospective review of studies on goodwill and the corresponding bibliography, which, I believe, will be useful for further research of this asset by Russian scientists.
     Methods The article includes an analysis of opinions of the best known researchers of goodwill from the 70's of the 20th century to the present day. It also reviews the evolution of major statutory documents regulating the goodwill accounting in various countries.
     Results I emphasize major trends in the studies on goodwill during the said period, i.e. identification of the synergetic nature of goodwill resulting from non-additive interaction of the acquiree company's elements with those of the acquirer, and within each company's elements; a shift from treating the goodwill as a depreciable asset with definite useful life to treating it as an asset with indefinite useful life subject to impairment test; extended discussion about the need to evaluate the internally created goodwill and disclose relevant information.
     Conclusions and Relevance The article may be useful for all those interested in the history of the goodwill concept, as well as the history of accounting and economic analysis.

Keywords: goodwill, history, financial statements, mergers and acquisitions

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