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Valuation of Goodwill and calculation!! question asked in many companies,try to remember the methods..
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Answer Posted / bjanmejai
Valuation of Goodwill
1. Super profit Method
2. Capitalization method
Factors for valuing GW
1. FMP
2. CE
3. NRR
Points to be considered while Calculation of FMP
1. Only Profit of those years with normal activity to be considered (years of Abnormal activity excl.)
2. Profits – Operating profits (non-operating items excl but if they are recurring to be incl)
3. Income from Trade Investment only to be considered (NTI not to be considered)
4. Fluctuating Profits – Simple Avg
5. Profits with a trend - Weighted Avg
6. If fixed asset is revalued – ignore p/l on revaluation , if other assets(liab)- consider
7. But consider addl. depn on the revaluation o FA
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