EFFECT OF GOODWILL ON COMPANY FINANCIAL RESULTS

Abstract

Goodwill is the difference between the value of a company in the stock market at a particular time and its accounting-asserted net assets. This is the premium that the buyer of a company pays over the net assets of a company because of its reputation in the market, brand, management and staff expertise and the know-how. It is an intangible value of a company that enables it to make greater profits. In this paper we explore some of the basic characteristics of goodwill which is becoming an increasingly more important element by which increasing of the capital value of a company is achieved. We study the main factors that determine the amount of goodwill, and we also deal with the analysis of accounting displays of goodwill and effects it has on a company's financial results.