Share this content


Adding a goodwill valuation to the balance sheet

Didn't find your answer?

 A  company director has just asked if he can value his company and add goodwill to the balance sheet to increase the value of the company. The company made a £9800 profit in 2019 and an £8000 loss in 2018 but has a turnover of £420k. He was mentioning a figure of £200k for goodwill i'm not sure this could be justified. Is valuing your own goodwill allowed? If so does the double entry go to a valuation reserve? If allowable what sort of figure would be acceptable, i'm estimating a much lower £10k

Replies (9)

Please login or register to join the discussion.

By lionofludesch
02nd Jul 2020 16:24

He'd need a new accountant if he asked me to do that.

Thanks (1)
Replying to lionofludesch:
By J accountant
02nd Jul 2020 16:28

i was thinking that only purchased goodwill should be shown and therefore this wouldn't be this correct?

Thanks (0)
By paul.benny
02nd Jul 2020 16:30

It is not permitted to value internally-generated goodwill

Thanks (1)
By Anonymous.
02nd Jul 2020 16:36

J accountant wrote:

 but has a turnover of £420k.

The saying is: "turnover is vanity, profit is sanity, cash is king".

Why does he want to increase his balance sheet assets?

Thanks (1)
Locutus of Borg
By Locutus
02nd Jul 2020 16:41

J accountant wrote:

A company director has just asked if he can value his company and add goodwill to the balance sheet

The answer to the question is no. Purchased goodwill only.

Thanks (1)
By SXGuy
02nd Jul 2020 16:46

If it was allowed we'd all do it.

Thanks (1)
By ireallyshouldknowthisbut
02nd Jul 2020 17:05

You client will now ask "but can I open a new company, and buy the business and goodwill from the old company?"

Be prepared for that one before they ask.

Thanks (1)
By Paul Crowley
02nd Jul 2020 18:00

Any reason why client thinks a good idea?
Are "dividends" perchance a bit to high?
What would be the double entry?

Not one responder on client's side yet
And there will not be one responder on client's side for a very good reason

Thanks (0)
By CW2012
06th Jul 2020 18:03

I had a client once who increased his company's value by issuing 1,000,000 shares to himself and his business partner as he thought a purchaser would just buy the share capital, when I debited the DLA's and asked that £1,000,000 was paid into the company bank account he turned a funny colour and never interfered in the accounts again.

Thanks (0)
Share this content

Related posts