Nature of Goodwill /// Need for Valuation of Goodwill:

We have to treat goodwill in accounting terms as an asset. It is not a physical asset because we cannot see or touch it. Despite this, we treat it as an intangible asset because we derive some value from it.

According to Accounting Standards, an intangible asset must contain the following features. Since goodwill contains all these characteristics, we can conclude that it is an intangible asset.

1. It must have characteristics of assets. This means that it must have some clearly identifiable value.
2. The asset must have future economic benefits. The firm must be able to expect and predict what value they will get from it.
3. Its value must be measurable. It is not an asset if we cannot measure its value in monetary terms.

Need for Valuation of Goodwill:

• If any new partner takes.
• Any old partner retires from the firm.
• There is any change in the profit-sharing ratio among the partners.
• Any partner dies.
• Different partnership firms amalgamate.
• Any firm sale, and.
• Any firm converts into a company.