Forum Archive Index - November 2000

[Brian Gale <brigale@i4free.co.nz>]

Sorry Warner - in your BCH example their database would not be an asset 
shown as Goodwill. It could be a tangible asset (software) if they chose to 
show it that way, but really it is part and parcel of the company's 
infrastructure and would not appear in their accounts. Certainly if it was 
sold the purchaser would buy it as software which is tax deductible asset 
which can be depreciated according to the IRD scales. If the company was 
taken over then the whole question of the company's value, over and above 
the tangible asset value would be taken into consideration and their 
database, if not shown as a tangible asset, would certainly demand a high 
Goodwill payment.

I have not seen the BCH accounts but I doubt if they have any Goodwill 
unless it has come from take-overs.
  I feel you are getting confused as to the significance of Goodwill which 
only occurs in a take over situation where the agreed purchase price cannot 
be valued solely on fixed assets and an extra amount is paid based on the 
company's potential earnings. It then becomes a balancing entry in the 
books to account for the extra cash, or whatever, that has been paid by the 
purchaser.

Regards
Brian


At 16:48 19-11-00 +1300, you wrote:


>  eg. BCH put up for sale a Database that produces $10 million
>in earnings (an asset on goodwill side)


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