About dog goodwill, cat goodwill and not only: to a question of far-fetched terms, classifi cations and algorithms
DOI:
https://doi.org/10.21638/11701/spbu05.2016.407Abstract
The article is devoted to the economic substance of one of the most important economic categories — goodwill as a pricing factor on the capital market and the formation of ideas about the economic potential of the business entity. Goodwill as a subject for discussion is considered the most actively by experts in the field of accounting. However, this category is not a pure subject of accounting only; therefore, adequate perception of this category is of interest to a wide circle of business participants. The authors briefl y reviewed the history of the emergence of this category in the economic and legislative environment of business activity and demonstrated in historical perspective the main discussion on its interpretation, evaluation and reflection in the information environment. The article shows that the treatment of goodwill as an intangible asset is highly conditional. There was a certain inherent in the financial analytics. The authors explain the reasons of occurrence of erroneous defi nitions and goodwill estimation algorithms given in the domestic scientifi c, educational, and normative literature. Examples demonstrating the importance of this category in the market economy are presented as well. The authors explain the logic of goodwill evaluation and the practice of corresponding counting algorithms.
The main part of the article provides a brief review of four key topics that reveal the essence of goodwill, respectively, of its typology, logic and pricing options, and finally presenting the specifics of its reflection in financial reporting. Refs 47.
Keywords:
goodwill, internally generated goodwill, purchased goodwill, evaluation of goodwill, amortization of goodwill, the idea of goodwill in the fi nancial statements, balance sheet, intangible asset, test for impairment
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References
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Translation of references in Russian into English
Gudvil: sinergeticheskaia sushchnost’, otsenka, uchet, analiz [Goodwill: synergetic essence, an assessment, the account, the analysis]. Ed. by A. E. Ivanov. Moscow, Publ. RIOR, INFRA-M, 2015. 227 p. (In Russian)
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Arnold J., Egginton D., Kirkham L., Macve R., Peasnell K. Goodwill and Other Intangibles: Theoretical Considerations and Policy Issues. London, The Institute of Chartered Accountants in England and Wales, 1992. 105 p.
Bithell R. A Counting House Dictionary. London, George Routledge and Sons, 1882. 334 p.
Blaug R., Lekhi R. Accounting for Intangibles: Financial Reporting and Value Creation in the Knowledge
Economy. London, The Work Foundation. 2009. 84 p. Available at: http://www.theworkfoundation.com/downloadpublication/report/223_223_intangibles_final.pdf (accessed: 01.07.2016).
Bone R. G. Hunting Goodwill: A History of the Concept of Goodwill in Trademark Law. Boston University Law Review, 2005, vol. 86, pp. 547–622. Available at: http://www.bu.edu/law/journals-archive/bulr/volume86n3/documents/bonev2_000.pdf (accessed: 01.07.2016).
Courtis J. K. Business Goodwill: Conceptual Clarification Via Accounting, Legal and Etymological Perspectives. The Accounting Historians Journal, 1983, vol. 10, no. 2, pp. 1–38.
Dicksee L. R. Goodwill and Its Treatment in Accounts. The Accountant, January 1897, pp. 40–48.
Dicksee L. R., Tillyard F. Goodwill and Its Treatment in Accounts. 3rd ed. London, Gee & Co, 1906 (1st ed. published in 1897). 168 p.
Dieudonne M. Credit, Shares and Goodwill: A Veblenian Trinity. 2016. 26 p. Available at: https://hal.archivesouvertes.fr/hal-01264730/document (accessed: 08.10.2016).
Ding Y., Richard J., Stolowy H. Towards an Understanding of the Phases of Goodwill Accounting in Four Western Capitalist Countries: From Stakeholder Model to Shareholder Model. Accounting, Organizations & Society, 2008, vol. 33, issue 7–8, pp. 718–755.
Dowling G. Creating Corporate Reputations: Identity, Image, and Performance. Oxford, Oxford University Press, 2001. 320 p.
Fawcett H. Manual of Political Economy. London and Cambridge, Macmillan and Co., 1863. 587 p.
Financial Accounting: An Introduction to Concepts, Methods and Uses. Eds. C. P. Stickney, R. L. Weil, K. Schipper, J. Francis. South-Western Cengage Learning, 2010. 960 p.
Foster R., Kaplan S. Creative Destruction: Why Companies that are Built to Last Underperform the Market and how to Successfully Transform them. New York, Doubleday, 2001. 384 p.
Geis G. T. Semi-Organic Growth. John Wiley and Sons, 2015. 240 p.
Harris W. The Law and the Practice in Relation to Goodwill. The Accountants’ Student Journal, April 1884, pp. 256–263.
Hatfield H. R. Modern Accounting, Its principles and some of its problems. New York, D. Appleton, 1909. 367 p.
Higson C. Goodwill. British Accounting Review, 1998, no. 30, pp. 141–158.
Hoffman J. One Step Forward and Two Steps Backward — Goodwill as a Distributable Asset of a Law Partnership. Akron Law Review, 1987, vol. 20, issue 1, article 8, pp. 157–174. Available at: http://ideaexchange.uakron.edu/akronlawreview/vol20/iss1/8 (accessed: 08.07.2016).
Hughes H. P. Goodwill in Accounting: A History of the Issues and Problems. Research monograph No. 80. Business Publishing Division, College of Business Administration, Georgia State University, Atlanta, 1982. 223 p.
Kam V. Accounting Theory. 2nd ed. John Wiley and Sons, Inc., 1990. 581 p.
Kaner H. A New Theory of Goodwill. London, Sir I. Pitman & Sons, Ltd, 1937. 73 p.
Leake P. D. Commercial goodwill: Its history, Value and Treatment in Accounts. London, Isaac Pitman and Sons Ltd, 1921. 260 р. (4th ed. — 1948).
Leake P. D. Goodwill: Its Nature and How to Value It. Accountant, 17 January 1914, no. 50 (2041), pp. 81–90.
MacLeod H. D. Principles of Economical Philosophy. Vol. 1. Second ed. London, Longmans, Green, Reader and Dyer, 1872. 676 p.
McLeay S., Neal D., Tolington T. International Standardisation and Harmonisation: A New Measurement Technique. Journal of International Financial Management and Accounting, 1999, vol. 10, issue 1, pp. 42–70.
Merlin S. P. J. The Law and Practice of Interpleader in the High Court and County Courts. London, Butterworth and Co, 1907. 256 р.
More F. Goodwill. The Accountant, 1891 (April 11), no. 17 (853), pp. 282–287.
Mroczkowski P. The Cat, the Dog, the Rat and the Rabbit: Identifying and Valuing “Goodwill” aft er FC of T v Murry”. Journal of Australian Taxation, 1999, vol. 2, no. 4, pp. 212–226.
Mueller G., Gernon H., Meek G. Accounting: an International Perspective. 3rd ed. Irwin, 1994. 200 р.
Nelson R. H. The Momentum Theory of Goodwill. The Accounting Review, 1953, vol. 28, no. 4, pp. 491–499.
Owens R. N. Goodwill in the Accounts. The University Journal of Business, 1923, no. 1(3), pp. 282–299.
Qasim A., Haddad A., AbuGhazaleh N. Goodwill Accounting in the United Kingdom: The Effect of International Financial Reporting Standards. Review of Business and Finance Studies, 2013, vol. 4, no. 1, pp. 63–78.
Ratiu R. V., Tudor A. T. Th e Theoretical Foundation of Goodwill — A Chronological Overview.
Procedia — Social and Behavioral Sciences, 2013, no. 92, pp. 784–788. Available at: http://www.sciencedirect.com/science/article/pii/S1877042813028863 (accessed: 08.07.2016).
Should Goodwill Still not be Amortized? Brussels, EFRAG, 2014. 53 p. Available at: http://www.ifrs.org/Meetings/MeetingDocs/ASAF/2014/September/03B-Appendix-A-Discussion-Paper-Should-goodwill-still-not-beamortised.pdf (accessed: 18.06.2016).
Stora J. Earnings Management Th rough IFRS Goodwill Impairment Accounting: In the Context of Incentives Created by Earnings Targets. Helsinki, Hanken School of Economics, 2013. 118 p. Available at: https://helda.helsinki.fi /bitstream/handle/10138/39477/256_978-952-232-197-8.pdf?sequence=1 (accessed: 01.07.2016).
The Billion Dollar Startup Club. Available at: http://graphics.wsj.com/billion-dollar-club/ (accessed: 13.07.2016).
Thurm S. Buyers Beware: The Goodwill Games. The Wall Street Journal, 2012, 14 Aug. Available at: http://www.wsj.com/articles/SB10000872396390444042704577587302625535444 (accessed: 18.04.2016).
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Published
2016-12-30
How to Cite
Ковалев, В. В., & Ковалев, В. В. (2016). About dog goodwill, cat goodwill and not only: to a question of far-fetched terms, classifi cations and algorithms. St Petersburg University Journal of Economic Studies, (4), 124–153. https://doi.org/10.21638/11701/spbu05.2016.407
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Accounting and financial analysis
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Articles of the St Petersburg University Journal of Economic Studies are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.
