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Goodwill is an intangible asset associated with a business combination. Goodwill is usually recorded when a corporation acquires another corporation and calculated as follows:

Goodwill = a – b – c
a) The purchase price of the corporation
b) Fair value of the identifiable tangible and intangible assets acquired
c) Liabilities that were assumed.
Goodwill is usually reported as a non-current asset on the balance sheet of the corporation. Accounting Standards for Private Enterprises (“ASPE”) requires goodwill to be tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the reporting unit to which the goodwill is assigned may exceed the fair value of the reporting unit. When the carrying amount of good will exceeds its fair value, an impairment loss must be recognized in an amount equal to the excess. An impairment loss recognized cannot be greater than the carrying amount of the goodwill. Under ASPE, reversal of goodwill impairment losses is prohibited.

If you need any further information in relation to Goodwill or any other accounts or sections of the financial statements, please contact us.

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Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services