THE CLASSIFICATION OF GOODWILL- AN ESSENTIAL ACCOUNTING ANALYSIS
THE CLASSIFICATION OF GOODWILL- AN ESSENTIAL ACCOUNTING ANALYSIS

Summary/Abstract: In this article we discuss the concepts of purchased and internally generated goodwill and propose a new classification, which is designed to consider smaller companies’ specifications. We first analyze both the approaches in the literature and in the international accounting standards, in particular, IFRS 3 “Business Combinations”, as to how purchased goodwill is classified. Second, we review the literature and the IFRS 3 “Business Combinations” about internally generated goodwill. We determine the meaning of internally generated goodwill and discuss the main arguments in the debate on for and against its recognition in the accounting reports. Our study manages to summarize all the types of goodwill used in the field of accounting, by thoroughly covering the related literature and international accounting standards. More importantly, our study offers a personal perspective of goodwill classification and its impact on a business. In this article we manage to clearly differentiate between all types of goodwill and discuss both purchased and internally generated goodwill. The conclusion we reach following our study is that a right classification of goodwill is essential to the management of a business

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