Question

which standard/sector talks bout treatment of goodwill in case of reconstitution of partnership

Answer 1

Answer:

Existing business partners

Explanation:

Goodwill is an intangible asset of a company and is basically linked with the reputation that a company holds in the market and with its customers and even competitors

In accounting, it is possible to find a value of this intangible asset especially when finding the overall worth of a company

When a new partner is admitted into a partnership, the new partner will acquire a share in the profits of the firm and because of this the old partners will be given a compensation.

Answer 2

The AS- 26 states the treatment of goodwill in case of a reconstitution of partnership.

• Reconstitution of a partnership is the changes brought on by certain circumstances, like the retirement/ death of a partner, new partner entry, business changes among existing partners, or changes in profit sharing.
• The standard AS-26 states that after mutual goodwill has been typically raised, as a direct reconstitution result, then goodwill must be written off immediately.  
• This means, that as per this standard, goodwill has to be modified through the capital account of partners.