Due to its unique geographical location, long business history, high-level management, excellent service, good reputation and harmonious social and enterprise relations, the profit level of enterprises is higher than the average profit level of the same industry. These factors that have a positive impact on corporate profits are essentially a mixture of intangible assets that are not accounted for and cannot be confirmed separately, which we call goodwill. Goodwill is a special intangible asset of an enterprise, which has the following characteristics: (1) Goodwill cannot exist independently of the enterprise; (2) It is difficult to accurately measure the value of goodwill; (3) There is no reliable or expected relationship between the value of goodwill and any related costs; (4) It is difficult to estimate the factors that constitute goodwill; (5) The value of goodwill will fluctuate greatly with the change of internal or external environment.
American accountant E·S· hendrickson's view on the nature of goodwill is generally accepted by domestic theoretical circles. He introduced three viewpoints in Accounting Theory: (1) the theory of goodwill value. That is, goodwill is the intangible value that people have a good impression on enterprises. This kind of goodwill may come from the superior geographical location, good reputation, exclusive privilege and good management of the enterprise. (2) Excess return theory. Goodwill is the present value of an enterprise's excess profits. An enterprise has a good reputation because it can get higher profits than its peers for a long time. This theory grasps the basic conditions of goodwill as enterprise assets, namely economic resources, profit potential and monetary measurement. (3) Total pricing account theory. Goodwill is the total valuation account of an enterprise, which means that the total value (overall value) of an enterprise's assets exceeds the sum of its individual values, that is, "the whole is greater than the sum of its individual components". [ 1]
Over the years, accounting scholars and accounting practitioners have conducted various studies on the composition of goodwill. In goodwill accounting, George Caturt and Newman Ohlson sum up the factors that constitute goodwill as 15 from the perspective of self-creation: (1) excellent management team; (2) Excellent sales organization; (3) management weaknesses of competitors; (4) Effective advertising; (five) secret technology or formula; (6) Good labor relations; (7) Excellent credit rating; (8) leading the staff training plan; (9) High social status; (10) Discovery of talents or resources; (1 1) Preferential tax payment conditions; (12) government policies are favorable; (13) Good cooperation with other companies; (14) strategic position: (15) competitors are not well developed.
Second, the accounting treatment of self-created goodwill
According to the current accounting standards, self-created goodwill is not recognized as an intangible asset of an enterprise because the expenses incurred during its formation are difficult to measure. British "Standard Accounting Bulletin -22 Goodwill Accounting" points out: "There is no difference between buying goodwill and creating goodwill. However, because the market transactions of enterprises occur at a specific time, although the valuation of enterprises is subjective, the value of purchasing goodwill can be determined, but the self-created goodwill is not. " [2] This reflects the general attitude of accounting circles towards the accounting treatment of goodwill. In fact, such a huge goodwill value generated in the process of enterprise merger and acquisition cannot be generated when the enterprise is acquired. The purchased goodwill is only a temporary state of goodwill during the property right transaction, and the goodwill exists more in the state of self-created goodwill.
Theoretically speaking, first of all, accounting only recognizes purchasing goodwill, but not self-created goodwill, which essentially abides by the cash basis principle and violates the accrual basis principle. As a long-term and effective management of an enterprise, the gradually formed goodwill is not confirmed and recorded on the day of formation, but only recorded when the transaction is realized. As an excess earning capacity, which year and month does it represent the performance of the acquired enterprise? The purpose of carrying out accrual basis in accounting is to correctly implement the matching principle, so as to correctly measure the profit and loss of each period. If the self-created goodwill only recognizes the income it brings, but does not recognize the consumption it brings during the long benefit period after its formation, it actually distorts the implementation of the matching principle, so it is difficult to say that the gains or losses obtained by such measurement are objective and fair. Secondly, in accounting, the purchased goodwill is confirmed, but the self-created goodwill is not confirmed, which overemphasizes the reliability principle of accounting information and abandons the correlation principle. Indeed, the measurement of self-created goodwill is difficult due to many factors, and the measurement results are not accurate enough. However, accounting reliability is also a relative concept, and even the measurement of tangible assets may not be completely reliable. Moreover, if we think that only the price of the purchased goodwill can meet the basic standard of confirmation-it can be measured reliably, how can the ups and downs of the purchase price explain the reliability of the goodwill value in the transaction process? Finally, accounting only recognizes the purchased goodwill and does not recognize the self-created goodwill. Although it follows the principle of prudence, it violates the principle of materiality and the practice of full disclosure. If the principle of materiality and the practice of full disclosure require that the important financial information of enterprises should be fully disclosed, the long-term existence of excess profits of enterprises cannot be said to be unimportant, and the reasons for this situation cannot be reported. Otherwise, when the acquired enterprise suddenly has huge goodwill, it is difficult for the accounting report to tell the whole story.
Therefore, the author believes that self-created goodwill exists and must be confirmed. Just as the income from contracting long-term projects can be recognized according to the contract progress, so can the goodwill, a special intangible asset. For the specific measurement, a special goodwill evaluation institution can be set up to carry out the evaluation work. Because of its own characteristics, goodwill determines the evaluation method different from general assets. Generally speaking, the methods of asset evaluation mainly include market method, cost method and income method, but the market method and cost method are not suitable for the evaluation of goodwill, which is the restriction of the characteristics of goodwill on the evaluation methods. The market method can't be applied to the evaluation of goodwill because goodwill can't exist independently without its affiliated enterprises, and there is no separately traded goodwill, so there is no market price of goodwill. The cost method is not applicable to the evaluation of goodwill, because the value composition of goodwill has nothing to do with cost.
In practice, the evaluation method of goodwill is mainly income method, which is divided into excess income method and intercept method.
1. excess return method
Goodwill value = sum of assessed values of individual assets of the assessed enterprise × (expected rate of return of the assessed enterprise-industry average rate of return)/applicable capitalization rate.
This method is mainly suitable for enterprises with good operating conditions and stable excess returns. This method closely combines the nature of goodwill with its actual evaluation operation, which better embodies the principle that goodwill is the capitalized value of excess income of enterprises.
2. Cutting difference method
Goodwill value = the overall asset appraisal value of the enterprise-the sum of the appraisal values of individual identifiable assets of the enterprise.
The author thinks it is not appropriate to evaluate goodwill by tangent method. First of all, let's look at the evaluation idea of tangent method. First of all, the overall asset value of the enterprise is evaluated by the overall evaluation method. Secondly, the value of all kinds of tangible assets and the value of intangible assets that can be identified individually are evaluated by the method of individual evaluation. Third, the overall evaluation value MINUS the total value of assets is the goodwill of the enterprise.
In terms of thinking, (1) overall evaluation and individual evaluation are different in nature. The overall evaluation uses the expected return method to get the overall asset value, and the single evaluation uses the cost method or the market method to get the tangible asset value and intangible asset value. The measurement standards of the two are different, so it is not appropriate to subtract them directly. (2) The nature of goodwill determines that its value is expressed through the whole enterprise, and its value also includes the benefits generated by other intangible assets, which inevitably leads to duplication. (3) The evaluation cannot be 100% accurate. Therefore, under the condition that the overall capital value of the enterprise is certain, the value of goodwill decreases with the increase of the share of intangible assets that can be determined, which obviously does not conform to the objectivity of goodwill.
In contrast, the capitalization method of excess income is more scientific in evaluating goodwill. The idea is: first, evaluate the single tangible assets and single identifiable intangible assets of the enterprise, and add them to get the sum of the values of the single assets of the enterprise. Second, collect and estimate the industry average return on capital. Third, multiply the sum of the evaluation values of individual assets of an enterprise by the industry average rate of return on capital, and get the income value created by calculating the sum of individual assets of an enterprise according to the industry average income level. Fourth, according to the income of the enterprise in the past few years, predict the future average annual income value. Fifth, the excess income created by goodwill is the income created by deducting the sum of individual assets from the average annual income of the enterprise in the future. Sixth, choose an appropriate capitalization rate to restore the annual excess income of enterprises, that is, the evaluation value of goodwill.
In applying this method, we should pay attention to three problems: (1) We must comprehensively consider the various elements of corporate goodwill, and we can't just rely on the operating results of a certain previous year to estimate its forecast income. (2) Possible changes in the future must be considered. (3) Pay enough attention to the changing trend of enterprise income, liabilities and some important operating income and expenses. In the current accounting standards, the human, financial and material expenses incurred in the process of goodwill generation have been included in the corresponding assets or period expenses. Therefore, there is no future amortization problem for self-created goodwill. Displaying self-created goodwill on statements is mainly to provide users with financial information that is more conducive to their decision-making. Therefore, as long as the self-created goodwill can obtain a fair price, it can be recognized and measured by accounting. Due to the different evaluation results of different evaluation agencies, according to the principle of prudence, the lower evaluation results can be used as the entry price of self-created goodwill. For accounting treatment of goodwill, according to the above principles, the subject of "self-created goodwill" can be set up, and the equity subject of "self-created goodwill value" should be set up accordingly. In the balance sheet, the asset side separately lists the "goodwill" item, and at the same time adds the "self-created goodwill value" item to the owner's equity.
If the self-created goodwill is confirmed by evaluation:
Borrow: self-created goodwill (asset account)
Loan: self-created goodwill value (equity account)
Reassessment every year. If there is any added value:
Borrow: self-created goodwill
Loan: self-created goodwill value
In case of impairment, the opposite entry is made every year to adjust the value of self-created goodwill, but it is not amortized, so as to fully reflect the real situation of the enterprise in time. Adjusting the value of self-created goodwill through these two accounts will not affect the current profit and loss of the enterprise. The excess income brought by the self-created goodwill of enterprises has been reflected in the comparison between the current financial indicators of enterprises and the industry level.
Third, the accounting treatment of outsourcing negative goodwill
China's accounting standards have detailed provisions on outsourcing goodwill, and here I just want to put forward some questions and suggestions on negative goodwill.
Generally speaking, in the process of enterprise merger and acquisition, the amount of purchase price paid by the acquired enterprise to obtain the excess profit of the acquired enterprise exceeds the fair value of its net assets is recognized as goodwill. When the price paid by the purchasing enterprise to obtain all the net assets of the merged enterprise is lower than its fair value, it is called negative goodwill. Theoretically, negative goodwill cannot exist. According to hendrickson, if the sum of the fair values of the identifiable net assets of the merged enterprise is greater than the purchase price of the merged enterprise, the owners of the merged enterprise will sell the net assets item by item, instead of selling the net assets as a whole or in packages like having positive goodwill. Therefore, negative goodwill is logically impossible. However, negative goodwill does exist in the practice of enterprise merger and acquisition, and we call this phenomenon, which exists objectively and cannot be reasonably explained by existing theories, "the paradox of negative goodwill". At present, there are three unique views on the explanation of outsourcing negative goodwill in China's accounting circles: (1) enterprise loss theory; [3](2) the theory of saving transaction costs; [4](3) The theory of self-created goodwill transformation of the acquired enterprises, [5] In addition, there are some popular views, such as overestimating the fair value of assets, superb negotiation skills of the acquired enterprises, hidden liabilities of the acquired enterprises and so on. [6]
At present, there are many ways to confirm negative goodwill: (1) Some people advocate taking negative goodwill as a separate item of shareholders' equity, that is, "reserve", which will be transferred to realized profits when the acquired assets are impaired or sold; (2) Some people advocate that negative goodwill should be recorded as a project, such as deferred revenue, and then the income will be systematically increased in the later accounting period; (3) Some people think that negative goodwill is the result of cheap transactions and the profit of current fund transactions, which should be recorded in the profit and loss account of the current year. (4) The fair value of non-monetary assets other than long-term securities should be reduced in proportion. If it is insufficient, the rest will be recognized as deferred revenue, amortized within a certain period, or directly recognized as income. [7]
The Accounting Standards for Business Enterprises No.20-Business Combination in 2006 stipulates that [8] the difference between the merger cost of the buyer and the fair value share of the identifiable net assets of the merged party obtained in the merger shall be handled in accordance with the following provisions: the fair value and merger cost of the identifiable assets, liabilities and contingent liabilities of the merged party shall be reviewed; If the merger cost is still less than the fair value share of the identifiable net assets obtained in the merger after review, the difference shall be included in the current profit and loss. This actually follows the third point above. I think this treatment is conducive to reflecting the true value of identifiable assets, liabilities and contingent liabilities, and comprehensively reflecting the overall performance of the enterprise. However, it is necessary to avoid the huge fluctuation of income in each accounting period that may be caused by completely recognizing the negative goodwill generated by mergers and acquisitions as income. Therefore, negative goodwill should be recorded under other comprehensive income in comprehensive income.
The measurement of negative goodwill has the following viewpoints: (1) If the sum of the fair value of the net assets of the acquired enterprise exceeds the purchase price of the acquired enterprise, the fair value of the illiquid assets of the acquired enterprise except the long-term securities investment shall be reduced according to a certain proportion, and if it is insufficient, it shall be recognized as negative goodwill; (2) The difference between the utility of human capital and its use cost is lower than the market average, that is, the difference between the return on net assets of an enterprise and the market average is recognized as negative goodwill; (3) Confirm negative goodwill according to the amount of assets outflow that may occur in the future; (4) The sum of the fair value of the net assets of the acquired enterprise exceeds the purchase price of the acquired enterprise, and all of them are recognized as negative goodwill.
I agree with the measurement method in (4). First of all, this treatment conforms to the analysis of the nature of negative goodwill and the definition of negative goodwill; Secondly, it is consistent with the measurement method of positive goodwill; In addition, it is more important to confirm and measure net assets according to the fair value at the time of merger and acquisition, which is more relevant to the decision of accounting information users. As for the measurement method of (1) (2) and (3), I think it can't be consistent with the measurement method of positive goodwill and can't accurately reflect the fair value of net assets at the time of merger and acquisition, so these three methods are not suitable for measuring negative goodwill. In addition, (2) and (3) this method is difficult to implement and cannot be accurately evaluated and measured.
Four. Disposal of goodwill after confirmation
Amortization of purchased goodwill has always been one of the hottest issues in the accounting field. A significant change in accounting standards in 2006 is to learn from the practice of international financial reporting standards and American financial accounting standards, cancel the amortization requirement for consolidated goodwill, and conduct impairment test on consolidated goodwill. Accounting Standards for Business Enterprises No.20-Business Combination stipulates: "The goodwill after initial recognition shall be measured by the amount after deducting accumulated impairment reserve, and shall not be amortized." At the same time, the Accounting Standards for Business Enterprises No.8-Impairment of Assets stipulates: "The goodwill formed by business combination shall be tested for impairment at least at the end of each year." Because goodwill cannot bring cash flow to the enterprise alone, its recoverable amount cannot be confirmed. The impairment test of goodwill can only be carried out in combination with its related asset groups or asset group combinations, and the value of goodwill is allocated according to the fair price ratio of each asset group or asset group combination. Theoretically speaking, the 2006 accounting standards regard goodwill as a permanent asset without amortization, which is more in line with the economic essence of goodwill and embodies the inseparable characteristics of goodwill and the whole enterprise. But this method has three obvious shortcomings: first, it inflated earnings per share; Second, the goodwill impairment test is troublesome and cannot overcome human factors; Third, it violates the accrual principle, and any asset can only play a role for a limited time.
Whether the purchased goodwill should be amortized and how to amortize it depends on the nature of the purchased goodwill itself. Generally speaking, in enterprise mergers and acquisitions, the part where the purchase cost of the main acquired enterprise exceeds the fair value of the identifiable net assets of the acquired target enterprise is called outsourcing goodwill. Self-created goodwill is the opposite of outsourced goodwill. In enterprise mergers and acquisitions, when the main acquired enterprise buys an outsourced goodwill, we say that the acquired enterprise has its own goodwill. Generally speaking, when an enterprise can obtain excess income compared with its peers, we say that it has created its own goodwill. Self-created goodwill is generated within the enterprise, which consists of two parts: unrecorded resources of the enterprise and the combined economic effect between all resources of the enterprise. There are essential differences between purchased goodwill and self-created goodwill. Self-created goodwill is generated in the process of enterprise merger and acquisition, which is determined by many factors in merger and acquisition. The purchase of goodwill is the combination of the value influenced by the self-created goodwill of the purchased enterprise, the expected value-added expenditure of M&A paid by the purchased enterprise, the non-financial motives of both parties and the negotiation. Outsourcing goodwill has the nature of resources, but it is more like the loss of the main and acquired enterprises in mergers and acquisitions. Because there are essential differences between purchased goodwill and self-created goodwill, we can't confuse purchased goodwill with self-created goodwill, and then discuss it with self-created goodwill theory.
The author believes that the purchased goodwill reflects a loss of the main acquired enterprise in the transaction and should be amortized. As for the increase of the actual overall goodwill of the enterprise after the merger, it is included in the "self-created goodwill" of the enterprise as a whole through evaluation. Therefore, it is a realistic choice to use systematic amortization method to deal with outsourcing goodwill. But using this method, there is still a problem to be solved, that is, how many years to choose the amortization period. APB 17 limits the maximum amortization period of purchased goodwill to 40 years, [9] while IASNo.22 limits the amortization period to 5 years, [10] under special circumstances, the maximum amortization period shall not exceed 20 years, and the original accounting standards in China stipulate that the reasonable amortization period shall not be less than 10 years. In my opinion, considering that resources account for only a small part of the three components of outsourcing goodwill, and the income brought by these resources is extremely uncertain, the other two parts should be amortized as soon as possible or written off immediately. To sum up, the purchased goodwill should be amortized in the shortest possible time.
Verb (abbreviation of verb) knot
Combined with the characteristics of goodwill, the basic idea of accounting treatment of goodwill in this paper is to admit that goodwill exists objectively, and whether it is purchased or created by itself, it should be confirmed and disclosed. For self-created goodwill, it should be confirmed when it is formed. Specifically, the capitalization method of excess returns in asset evaluation can be non-amortized, and the value test is carried out at the end of the period to determine its increase or decrease. For the negative goodwill in outsourcing goodwill, the sum of the fair value of all the net assets of the acquired enterprise should be recognized as negative goodwill and recorded under other comprehensive income in comprehensive income to fully reflect the overall performance of the enterprise. In addition, the purchased goodwill should be amortized in the shortest possible time.