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Remarks On The Accounting Treatment Of Goodwill At The Level Of Blocks Of Trading Companies

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  • Violeta Isai

    (Dunarea de Jos University of Galati, Romania)

  • Daniel Bolea

    (Dunarea de Jos University of Galati, Romania)

Abstract

This paper presents the accounting treatment of goodwill, namely, its recognition, assessment and accounting, as part of the patrimonial assets of an economic entity. Specific, due to its structure, to any blocks of companies, the goodwill represents the cost surplus of an active block to the market value of the net purchased assets. Why would anyone pay for a company more than its actual accounting worth? Because the extra price is usually attributed to those intangible elements that cannot be assessed separately but whose horizon of expectation is usually related to prospective economic advantages such as the clientele, the top commercial location, the employees' level of training, market shares, good relationships with the employees, the suppliers, the banks etc. Many of the Romanian economic entities were sold at a price that was inferior to their accounting value because, following their assessment, the experts were able to ascertain the following: the existence of fixed assets that needed to be scrapped; the existence of stocks that were either depreciated or difficult to sell; the existence of outstanding debts that were either uncertain of lost for good; the existence of major debts carrying interest. The effect of such assessments led to a reduced marked value of all assets and an increased market value of the debts, or in other words, the possibility of a badwill occurrence. The relationship goodwill – badwill, specific to the blocks of trading companies, represents a current challenge in the recognition and evaluation of the goodwill in compliance with the current Romanian legislation as harmonized with the international accountancy standards.

Suggested Citation

  • Violeta Isai & Daniel Bolea, 2015. "Remarks On The Accounting Treatment Of Goodwill At The Level Of Blocks Of Trading Companies," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 431-434.
  • Handle: RePEc:ddj:fserec:y:2015:p:431-434
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    References listed on IDEAS

    as
    1. Mihaela-Cristina Onica, 2013. "Corporate Governance Codes - Examples Of Good Practice," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 172-178.
    2. Mihaela-Cristina Onica, 2013. "The Internal Audit – Key Pillar of Corporate Governance," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 9(6), pages 207-213, December.
    3. Mihaela-Cristina ONICA, 2012. "The Impact of the Application of IFRS on Reporting the Financial Position," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 335-340.
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