Question

Distinguish between purchased goodwill and non purchased goodwill?

Answer 1

hello..

Purchased Goodwill :- Purchased goodwill is that goodwill which is acquired by a firm for a consideration, whether paid in cash or kind.

Features :-

• It arises on the purchase of a business .
• It is shown as an asset in the balance sheet.
• It is amortised at the earliest . AS-26, Intangible assets prescribes that normally tangible assets should be written off within 10 years.

Self-Generated or Non-Purchased Goodwill :-

Self-Generated goodwill is not purchased for a consideration but is earned by the efforts of the management. It is an internally generated goodwill which arises from a no. of factors that a running business possesses .

Features :-

• It is generated internally , generally over the years.
• Its valuation is subjective assessment of the valuer .
• AS-26 prescribes that self-generated goodwill is not accounted as an asset.

hope it helps..

Answer 2

A consolidated financial statement covers the activities of the parent company and its subsidiaries in a single report, as if they were all a single company operating under one roof. ... To understand the difference between standalone and consolidated numbers, we need to understand the structure of a company.