Question

When there is continuous reduction in profit year, then which profit is taken into account for calculating goodwill ? / નફામાં દર વર્ષે સતત ઘટાડો થતો હોય ત્યારે પાઘડીના મૂલ્યાંકન માટે કયો નફો ધ્યાનમાં લેવાય છે?​

Answer 1

When there is a continuous reduction in profit year, then the weighted average method of goodwill calculation is used for calculating goodwill when profit is increasing or decreasing continuously.

• Goodwill is indeed an intangible asset that comprises a company's non-physical assets.
• It is extremely valuable, yet identifying and valuing it is difficult. Though intangible assets are hard to ascertain, they are undeniably important to a company's performance and worth.
• When using the average technique to calculate goodwill, profits from the past couple of years are averaged & adjusted for any predicted future change.
• Depending on the conditions, either a simple average or a weighted average can be utilized to average prior profits. If there is a clear upward or downward trend in profits, it is preferable to give the profits of recent years more weight than those of previous years.
• However, if there is no evident profit pattern, it is preferable to use the simple average.