Goodwill Formula

Goodwill Formula

Goodwill formula has been given below. Goodwill formula has been explained with a simple an example

Goodwill = Cost of investment + Fair value of NCI- Fair value of net asset

NCI= Non controlling asset

NCI can be calculated in two ways i.e. market value of shares or % fair value of the net asset.

Goodwill Formula Example

80% Acquisition = 160,000

Fair value of Non controlling interest = 80,000

Net asset value of Company = 220,000

Solution

Goodwill = Cost of investment + Fair value of NCI- Fair value of net asset

= 160,000+44,000-200,000

=4,000 (Goodwill)