The Accounting Review Vol. 26 No. 4 1951
SHOULD GOODWILL BE WRITTEN OFF?
Abstract
When goodwill is written off to income, it should appear as a charge in the operating section of the income statement. This author looks upon a payment for goodwill as a combination of deferred operating expense and payment for accrued interest on an investment purchased. It is the cost of future operating efficiencies as well as a payment for sales revenues to be received by the purchaser but earned by the seller. Accordingly, operating expenses must be increased and revenues decreased by the amount of the payment for goodwill. These ends are both accomplished when write-offs are made against income from operations. The annual charge should be dearly set forth as the last deduction before the amount commonly designated as "net income from operations." Concerning the method to be used in amortizing goodwill, that method would naturally be best which most nearly conforms to the actual decline in value of the intangible factors purchased. It is, of course, impossible to determine with any degree of accuracy the extent to which intangible factors are losing their effectiveness, especially when they are being replaced by new factors.
- DOI
- 10.2308/tar-7076522
- Volume
- 26
- Issue
- 4
- Pages
- 560-567
- Language
- en
- Sources
- openalex crossref