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January 30, 2020

Accounting for goodwill: still crazy after all these years

Goodwill has been always been a plaything – and an object of intrigue – in accounting and taxation. After more than fifty years, it remains one of the most interesting, fascinating and frustrating puzzles in accounting theory. Accounting theorists and standard setters have tried in countless approxmations to get closer to the essence of goodwill. However, there is still no commonly accepted definition of goodwill. And accordingly, its valuation is no more than a crutch, being the positive difference between firm value and thes sum all other assets that are not goodwill.

The recent white paper “Accounting for goodwill: still crazy after all these years” by Clemense Ehoff and Marvin L. Bouillon examines the changes in accounting treatment of goodwill from the sixties to the present. It is a must-read for all accounting and valuation practicioners to understand the status quo and the current discussions. The paper can be downloaded here.

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