Goodwill, sometimes purchased but often more significantly
internally generated, is the major constituent of the value of many
listed companies. Accounting aims to provide users of financial
statements with useful information, and more than fifty current
International Financial Reporting Standards prescribe accounting
disclosure requirements in minute detail. However, these Standards
dismiss internally generated goodwill with a single brief provision
that it is not to be brought to account at all. The impairment
regime now laid down for dealing with purchased goodwill contains
severe flaws, while previous methods have also been found to be
This book traces the history of the goodwill accounting
controversy in detail and demonstrates that it has been a prime
example of an issue 'conceived in a way that it is in principle
unsolvable'. It explores the problem of recognising the importance
of goodwill as a whole and finding a way of presenting meaningful
information regarding it in the context of the financial
statements. The author's proposed solution builds upon research
undertaken and uses a Market Capitalization Statement, based on a
modification of nineteenth century 'double accounting' in a modern
context. Examples show that the proposed Market Capitalization
Statement has the potential to provide significant information not
currently available form conventional financial statements, which
in turn are freed to present clearer information.
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