Question

The classification of intangible assets includes goodwill. Current FASB practice states that goodwill cannot be created, added to, or depreciated or amortized. Some companies have increased their value or have a significant portion of their assets tied up in goodwill. How appropriate is it for the FASB to take the position it has?

Answer 1

Goodwill in simple terms is the name or fame that the company has accumulated over the years by virtue of brand value, quality or any other factor that differentiates the firm from rest of the market. However, goodwill cannot be quantified in monetary terms since it is not purchased or paid any value for. It is an intangible asset which assists in generating revenues for the company and for its sustainability. It is certainly appropriate in my view for FASB to take such a stand since good will cannot be quantified and hence there is no point of it appreciating or depreciating or being amortized. It is more like the good name you have in the society, among consumers and others.