Accounting for Goodwill

In lieu of an abstract, below is the first paragraph of the paper. Goodwill has become an increasingly larger portion of the assets transferred to a company during an acquisition. Financial statement users are now in need of better information about goodwill. This paper will ( 1) compare the prior method of accounting for goodwill to the new method of accounting for goodwill, (2) examine some of the controversies surrounding the accounting method, and (3) examine some of the effects the new accounting method has had on businesses. Goodwill has become an increasingly larger portion of the assets transferred to a company during an acquisition. The value of many companies has shifted from land, buildings, equipment and other tangible items to intangible (and sometimes unidentifiable) items such as brand name, market reputation, efficient and effective internal processes, customer lists, and level of customer loyalty. Financial statement users are now in need of better information about goodwill. This paper will compare the prior method of accounting for goodwill to the new method of accounting for goodwill. The change in method has created controversy. The interpretation of the kind of asset goodwill represents is part of the controversy. The most useful method of recording the decline in value of goodwill is another part of the controversy. The method of recording the decline in value becomes particularly controversial when examined in terms of reliability. This paper will further explain the arguments of this controversy. Finally, this paper will identify the different stakeholders who will be affected by the implementation of the new accounting method