CALCULATING PURCHASED GOODWILL: PART 3

Following from Part 2 of this article, we are now going to discuss the various forms of cost of investment that a parent company can make when acquiring a subsidiary. For the purposes of goodwill calculation, the cost of investment must be their fair values at the date of acquisition.

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CALCULATING PURCHASED GOODWILL: PART 2

Continuing from Part 1 of this article, we are now going to look at some illustrations on how to calculate purchased goodwill using the proportion of net assets method and the full goodwill method.

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CALCULATING PURCHASED GOODWILL: PART 1

Purchased goodwill may arise on a business combination, i.e. when a parent company acquires a subsidiary. It is simply the difference between the cost of investment paid and the fair value of the subsidiary's net assets at the date of acquisition. In other words, it is the difference between what you pay and what you get.

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