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Advise Ms Lyn about the nature of goodwill

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Question - Adelaide Ltd has acquired Happy Shoes manufacturing division from Leongatha Ltd. The accountant, Ms Lyn, has shown the board of directors of Adelaide Ltd the financial information regarding the acquisition. Ms Lyn calculated a residual amount of $45 000 to be reported as goodwill in the accounts. The directors are not sure whether they want to record goodwill on Adelaide Ltd's statement of financial position. Some directors are not sure what goodwill is or why the company has bought it. Other directors even query whether goodwill is an asset, with some being concerned with future effects on the statement of profit or loss and other comprehensive income. Advise Ms Lyn about the nature of goodwill and how to account for it.

Reference no: EM133013703

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