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In the world of accounting, goodwill is included in the Intangible Assets component. Technically, goodwill starts to appear on the balance sheet or statement of financial position when a company wants to acquire another company by paying above the fair market value (Fair Value Market) which consists of the net assets of the company that it wants to buy.


The factors that make up goodwill itself are things like a good corporate reputation, strong brand identity, competent employees in their fields, technology that is considered cutting-edge, and the like. These things are clearly not physically measurable or difficult to qualify properly. Keep in mind, the recording of goodwill is listed in the Intangible Assets heading in the statement of financial position. This does not mean that goodwill is a tangible form of assets owned by a company, but rather a form of recognition or recognition of assets owned by a company.


According to US GAAP (United States Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standard) standards, the value of goodwill has an unlimited age so it does not need to be amortized. However, evaluation needs to be held when there is a decrease (impairment) or increase in goodwill each year. Usually, many companies evaluate goodwill for a period of 10 years.


Warren Buffet, a well-known investor used a case example at a company called See’s Candies in California. See’s company consistently earns a net profit of $ 2,000,000 with total tangible assets of $ 8,000,000. The implication, See’s company produces ROA (Return on Assets) value of 25%. The amount of ROA and net profit is arguably the result of contributions from the value of goodwill. This is also based on the services provided by See’s companies and various other advantages that are not measurable in nominal terms. Here are the steps you need to take to be able to assess your company’s goodwill:


1. Find the Book Value of All Assets Owned by the Company

Which means, this Book Value includes the total of Current Assets, Non-Current Assets, Fixed Assets, and Intangible Assets. You can get the nominal of these components from the statement of financial position or your company’s balance sheet.


2. Find & Determine the Fair Value of Company Assets

You can hire consulting services in the field of accounting to help find and determine the Fair Value of your company’s assets. Sometimes, the judgment of the consultant is subjective. However, if the consultant already has a good reputation, then the possibility of the value of each asset that you have can be justified well too.


3. Make Asset Adjustments

After the two things above are done, the next thing to do is make an adjustment by comparing the Book Value and the Fair Value of your Assets.


4. Calculate Total Net Assets

Next, try to calculate the total Net Asset of each Book Value, specifically the Fair Value of Your Assets. By reducing Total Assets to Your Total Liabilities / Liabilities (Net Asset Value = Total Assets – Total Liabilities / Liabilities).


5. Calculate the Goodwill Value

Finally, you can get the Goodwill value by reducing the actual total price paid by the company that bought your company with a Net Asset Value from the Fair Value of your company


Goodwill = Actual Selling Price – Net Asset Value based on Fair Value


The following is an example of the calculation of the Maju Jaya company Goodwill value purchased by the Prosperous Joint company


Advanced Jaya Company

Book value

Fair Value




Accounts receivable






Fixed assets



Intangible Assets



Total Assets



Total Liabilities



Net Asset Value




An explanation of why Fair Value is different from Book Value is:

a. The Fair Value of Accounts Receivable is smaller than Book Value because there are uncollectible receivables.

b. The Fair Value of Inventories is smaller than Book Value because there are some obsolete inventories.

c. The Fair Value of Fixed Assets is higher than Book Value because it turns out that the depreciation value of Fixed Assets at Book Value is greater than its fair value.


If the Joint Prosperous company buys Maju Jaya company for Rp.230,000,000, the Goodwill Value obtained is

Rp.230,000,000 – Rp204,000,000 (Net Asset Value of the Fair Value of the company) = Rp26,000,000.


The journals recorded by the buyer’s company, namely the Sejahtera Bersama company are:








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