Concepts of Accounting for Goodwill | Literature Review

Concepts of Accounting for Goodwill | Literature Review Accounting Goodwill Treatment Introduction Arnold, J., Egginton, D., Kirkham, L., Macve, R. and Peasnell, K., ‘Theoretical Considerations’, in Goodwill and Other Intangibles, The Research Board, London, pp3-18. According to the authors, financial reporting of goodwill has assumed importance just recently. In its earlier definition goodwill just meant customer loyalty. They attribute two main reasons for the increase in goodwill’s importance. First is the increase in merger and acquisition (MA) activities in the market and second is the rising stock market. This has created a wide gap between the book value and market value and also between the fair value and paid value of assets of a firm. As a result, the increasing importance of recognition, valuing and accounting of goodwill was widely felt. Definition Catlett, G. and Olson, N. 1968, ‘Accounting Research Study no 10’, Accounting for Goodwill, American Institute of Certified Public Accountants, New York, pp.1-21. The authors have taken Accounting Research Study no.5 by the Accounting Principles Board as a base for their study on Accounting for Goodwill. In their study, they say that the definition of goodwill has evolved and changed over time to reflect the true picture of its nature. Goodwill is difficult to measure and its accounting treatment is also very controversial. They have included the definition of goodwill from the Webster’s Third New International Dictionary. It defines goodwill as ‘the capitalized value of the excess of estimated future profits of a business over the rate of return on capital considered normal in the related industry’. In general, goodwill is a result of good reputation of the firm in the market. Superior quality goods and customer service, integrity and efficiency of management, good employee relations and many other factors helps a company earn goodwill. Nowadays, technological advantages, efficient manufacturing process, ability to raise finance also assume great importance. The earning power of goodwill is the most relevant concept as of today. Different Concepts Gynther, R. 1969, [Abstract of ‘Some â€Å"Conceptualizing† on Goodwill’, The Accounting Review, vol. 44, no. 2, pp.247-255], [Electronic], Available: JSTOR [2007, Nov 11]. Gynther has cited two main concepts of goodwill, the ‘residuum concept’ and the ‘future excess profits concept’. Under the residuum concept, goodwill is measured as a difference between purchase price and book value of a company’s assets. Goodwill is the residual value after taking into account all the tangible and identifiable intangible assets. According to future excess profits concept, goodwill is the present value of all the excess profits expected in the future, over and above the normal/average profits in the industry. It is difficult to measure goodwill using this concept as there is no certainty of the future profits. Nature and Characteristics Arnold, J., Egginton D., Kirkham, L., Macve, R. and Peasnell, K., ‘Theoretical Considerations’, in Goodwill and Other Intangibles, The Research Board, London, pp.18. Goodwill can be of two types. Goodwill can either be internally generated or purchased. Goodwill is said to be internally generated when a firm earns super profits. On the other hand, purchased goodwill is a result of merger and acquisition activities. However, goodwill is accounted only when a business is purchased or sold. Internally generated goodwill cannot be accounted otherwise. Catlett, G. and Olson, N. 1968, ‘Accounting Research Study no 10’, Accounting for Goodwill, American Institute of Certified Public Accountants, New York, pp.20-21. The value of goodwill cannot be directly attributed to a particular cost. Goodwill is sometimes created due to favorable conditions and certain other factors, and sometimes even without any efforts by a company. The value of goodwill is directly attached to a business. It cannot be separated and sold differently. Several factors can affect the value of goodwill. As such, the value of goodwill may rise or fall due to changes in those factors. The investors’ perception reflected in the stock prices forms the base for calculating goodwill. Treatments of goodwill Non-purchased goodwill Walker, G. T. 1938, [Abstract of ‘Non-purchased Goodwill’, The Accounting Review, Vol. 13, No. 3. pp. 253-259], [Electronic], Available: JSTOR Arts and Sciences 4 [2007, Nov 11]. In this paper Walker argued that almost all the accountants agree that non-purchased goodwill should not be recognized in account. â€Å"They are fully aware that goodwill created by a concern is just as valuable and in most instances, more valuable- to that concern than to the firm which might make a specific purchase of that goodwill†. Montgomery has pointed out this view in his Financial Handbook that goodwill may have economic value even without being purchased by another entity. But it was considered to be bad practice to record goodwill on the books since many frauds happened in the early days, when the term goodwill was freely used. Seetharaman, A., Balachandra, M. and Saravanan, A.S. 2004, [Abstract of ‘Accounting treatment of goodwill: yesterday, today and tomorrow: Problems and prospects in the international perspective’, Journal of Intellectual Capital, Vol. 5, Iss. 1, pp. 131-153], [Electronic], Available: Proquest ABI/INFORM [2007, Nov 11]. Seetharaman also argued in the article that only purchased goodwill is acknowledged for accounting purpose. Although, in reality, with the development of the relationship with suppliers, customers and the work force, all the business generate internal goodwill as they grow. But it seems that no attempt was made to account for non-purchased goodwill. Lee (2004) gave the reasons why there is no accounting for non-purchase goodwill: (1) The accountants adopt conservative view, together with the fear that internally generated goodwill may turn out to be a fictitious asset in order to make the balance sheet look better. (2) Certain accounting rules such as historical cost, objectivity and verifiability are extremely difficult to apply in accounting for non-purchased goodwill in practice. (3) It is difficult to revalue non-purchased goodwill annually. Some assumptions have been made to carry out the test, such as the estimation of future profits and of what should be a reasonable rate of return for a particular business. (4) The business costs which attribute to the value of goodwill are difficult to measure. For instance, it is difficult to bifurcate which part of the cost of RD or advertising expenditure contributed to the sales that in turn generated goodwill. Purchased goodwill 1. Immediately write off For: Hughes, H, P. 1982, ‘Goodwill in Accounting: A History of the Issues and Problems’, United States of America. Under this method, goodwill is immediately written off against an account in the equity part, generally retained earnings. Hughes presented in this book that the fundamental concern about immediately write off treatment is that goodwill was not an asset. Spacek expressed the view that the total expenditure of buying an entity or business over the fair value of the company is â€Å"a cost to the buyer of earning over and above the cost of the assets required to produce those earnings†. And Spacek points out that goodwill may generate future economic benefits, but those benefits are not secured (Cited in Hughes, 1982). Massoud, F. 2003, [Abstract of ‘Accounting for goodwill: Are we better off?’] Review of Business,Vol.24, Iss.2, p.26], [Electronic],Available: Proquest ABI/INFORM [2007, Nov 11] Spacek’s view is supported by the idea that goodwill is neither something that can be really used, nor it can produce earnings. But, it represented the investors’ appraisals of earnings or expectations of earnings. In such case, goodwill carried a risk of facing wide fluctuations which related to the investors’ decision. Therefore, the value of goodwill has no reliable or continuing relation to costs incurred in its creation, its purchase or its maintenance.

Barn Owl Essay

Gwen Harwood’s, ‘Father and child’, is a two-part poem that tempers a child’s naivety to her matured, grown up attitude. Barn Owl presents a threshold in which the responder is able to witness the initiation of Gwen’s transition. The transformation is achieved through her didactical quest for wisdom, lead by her childhood naivety and is complimented through ‘nightfall’, where we see her fully maturate state. The importance of familial relationship and parental guidance is explored in father and child, as well as the contrasting views on mortality and death. Barn Owl depicts death as a shocking and violent occurrence while the second poem, nightfall, displays that death can be accepted, describing the cyclical and ephemeral nature of life. Relationships, especially with Gwen’s parents, act as a catalyst for her maturation and leave behind sustaining memories as shown in many of her poems. In Barn Owl, Gwen initially represents her father as being â€Å"robbed of power† and an â€Å"Old No-Sayer†. The neologism, â€Å"No-Sayer†, incites a thought within the readers mind, rendering an image of a child through the simplistic syntax, representing a childlike view of the world. The combination of the two quotes separates the child and father, showing that the child disregards her father’s authority, ultimately expressing her view of their connection. However, in progression with the poem, we realise that the father plays a major role in the guidance of Gwen’s childhood. This idea is represented when considering Gwen’s fathers presence after she had injured the owl. â€Å"my father reached my side, gave me the fallen gun†. The positional verb â€Å"side† emphasizes the truthful relationship between father and daughter, as he is providing solace and support for Gwen, in this time of realisation, death and accountability, in contrast to the image set by â€Å"old No-Sayer†. The significance of Gwen’s parents to her maturation is again reinforced when considering the dialogue, â€Å"End what you have begun†. It is an imperative command which refers to the process of her childhood development and carries with it the idea that maturation is inevitable and must occur as a part of life. Nightfall indicates similarity in terms of the significance of parental guidance. For example, when Gwen states that her father keeps â€Å" a child’s delight forever, in birds†¦Ã¢â‚¬  we notice that Gwen has a sustaining memory of an integral part of her life due to her father, the owl shot in Barn owl. A more literal example of the importance of parental guidance Gwen preaches is revealed in Gwen’s confession, â€Å"once quick to mischief, grown to learn what sorrows†¦no words, no tears can mend. † This reveals the effect her father has had on her. She has matured, become an adult and has become understanding of the ephemeral nature of life a key concept evident in many of Hardwoods poetry and affirms the importance of Gwen’s parents to her development of a child to an adult. In many of her poems, Gwen adumbrates to a certain extent, as to not fully reveal what is brewing, in order to allow the reader to consider for themselves and make judgments on the situations presented. In father and child, the foreshadowing leads to integral moments of Gwen’s life and communicates with the reader. Barn owl initiates with the symbolic compound word â€Å"Daybreak†, foreshadowing possibilities of experience and awakening. This notion of possibility changes to a sense of actuality when Stanza 3 (versus 2-5) not only adds dramatic suspense to the story but prefigures the momentous event that changed the child’s life, the killing of the owl and corresponding realization of death. For example, the metaphor â€Å"master of life and death† sets a grave tone and places tension and apprehension in the readers mind as we are evoked to contemplate what dangerous deeds will be committed. The synecdoche, â€Å"punish beak and claw,† represents the fact that the child can only see and focus on parts of the owl, symbolically denotes that the child is blind to the enormity of what she is about to do. The responder is hinted further, by this synecdoche, on what the persona is about to shoot This is a reflection of the child’s naivety and allows the reader to understand the impelling force urging her to steal her â€Å"father’s gun†, and to take this quest for wisdom, inherent childhood arrogance. Similarly in nightfall, Gwen prefigures a monumental moment of her life, the death of her father. The title of the poem â€Å"nightfall†, is the binary opposite to â€Å"Daybreak† and therefore assembles a thought in the readers mind of the opposite of coming alive, end of time, death. Gwen’s understanding of the inevitability of death is highlighted when she says â€Å"Now the season that seemed incredible is come†. This quote in combination with the constant links to nature, in particular â€Å"fruits† is symbolic of the season autumn, the falling of ripe fruit and can therefore be interpreted as the end of her father’s time on earth, Gwen’s poem, Father and child, represents the cyclical nature of life through the inevitability of consequence and growth. Paternal guidance and familial relationship is seen as a key catalyst to her maturation and increasing understanding and responsibility, reverberated in many of Gwen’s poems. The foreshadowing of significant events assists the responder in connecting with the poem. For example in Barn Owl, we come to understand that it was Gwen’s child naivety that led to her stealing her father’s gun and taking the life changing quest for wisdom.

Computer Software Essay

What Is Computer Software? When you think of a computer imagine a machine made of two parts. The first part is the computer hardware, the physical parts of the computer that you can actually touch. Some examples of hardware are disks, monitors, boards, chips, etc. Hardware does all of the physical work of the computer, from memory storage to display. The second part, what we call â€Å"computer software†, acts as the brain of the computer, telling the hardware what to do and when and how to do it. Think of a computer as a living being † in this example, the hardware would be the ody, the eyes, the limbs, the lungs, etc. Computer software would be the mind, interpreting sounds we hear with our ears into recognizable symbols. The â€Å"software† in our brain would tell our other body parts how to behave. Both parts are crucial for the survival of the body. Computer hardware, any single part of a larger machine, is only ever on or off. There are no other states of being for the hardware, and computer hardware operates on a system called â€Å"binary’. Computer software uses this binary code to tell the computer hardware what to do. Computer software translates our human input (clicking a ouse or loading a disk into a drive) into a language that the computer hardware can use to actually perform a function. As such, computer software depends on hardware to survive Just as much as hardware depends on software. Where Does Computer Software Come From? Computer software is usually created by computer programmers using a programming language. The programmer â€Å"learns† a programming language that the computer can use to command the hardware to perform a task. The computer programmer (or software engineer) writes commands in a given programming language tha the computer understands. These â€Å"languages† are not otally like languages you speak, but many of them use our language in a way that makes sense to the programmer. Common commands in programming languages are things like â€Å"if / then† or â€Å"type† or â€Å"function†. These individual commands are called â€Å"code†. Another piece of software called a â€Å"compiler† takes the source code writen by a software engineer and translates it into the language that the computer understands. What starts as a series of translations results in activity at the software and hardware level of a computer known as a computer â€Å"program†. This is Just another word for software.

Animal Cruelty Laws Should Be Legal - 1550 Words

In the following essay, I will debate the issue of animal testing along with the manufacturers whom participate, and provide information for both sides. I will start by presenting some basic animal cruelty laws. The Animal Legal Defense Fund maintains a database of criminal animal cruelty cases in the U.S. reported to our organization. In the last ten years, over 30% of cases that we have tracked involve animal neglect (Animals Neglect Facts). Animal cruelty includes some of the following, torturing an animal, failing to provide food, care or shelter, abandoning an animal, killing, seriously injuring or poisoning an animal, causing an animal to fight with another, using a live animal as a lure in a dog race, etc. (Texas Animal Cruelty†¦show more content†¦For every ingredient put into a product an animal goes though testing for it pain relief is rarely provided and the animals used are always killed at the end of each test (Humane Society.Org). Some makeup brands that cont inue to test on animals are MAC, Dior, and Tom Ford just to name a few the list goes on (Companies That Test on Animals). It does not stop at makeup other everyday used things test on animals such as, hair products, skin care, and soap. People have to take a moment and think about how much an animal suffered just to make their cheeks blush. On top of the cruelty, up to 90% of animals used in U.S. labs are not counted in the official statistics of animals tested (Do Something.Org). Exact numbers are not available because mice, rats, birds, and cold-blooded animals—who make up more than 99 percent of animals used in experiments—are not covered by even the minimal protections of the Animal Welfare Act and therefore go uncounted (Peta.Org). Accounting for the real number of animals including those not covered by the Animal Welfare Act would cause those numbers to look outrageously high. 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