Goodwill hunt: policymakers watch accounting shake up

Goodwill hunt: policymakers watch accounting shake up

For an accounting concept that sounds user-friendly, goodwill lifts hackers between investors and businesses.

After decades of debate, investment analysts and CFOs still disagree on how to deal with this accounting legacy resulting from buybacks. The debate may seem obscure, but it is important for financial analysis, and therefore for investors. For some companies, especially acquiring companies, goodwill may represent half or more of their total assets.

Goodwill records the excess paid for a business over its net asset value when one business buys or merges with another. This premium is found on the balance sheet among the intangible assets once the transaction is concluded.

The U.S. accounting arbiter, the Financial Accounting Standards Board and the International Accounting Standards Board, are now considering changes to address criticisms of this long-standing accounting practice.

Before 2002 in the United States, and 2004 internationally, goodwill on the balance sheet was …

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