Goodwill Calculator

How it is calculated

The tool takes three amounts for the same acquisition, all in the same currency: the purchase price, the fair value of the identifiable assets acquired, and the liabilities assumed. net identifiable assets = assets − liabilities. goodwill = purchase price − net identifiable assets. premium = goodwill ÷ net identifiable assets × 100, the premium paid over net asset value. A negative goodwill figure means the price was below net asset value, which accountants treat as a bargain purchase gain, not goodwill. The price and assets must be above zero and liabilities cannot be negative. When net assets are zero the premium is shown as 0 %, and when liabilities exceed assets the premium is measured against a negative base, so read goodwill instead. The values must be fair values, not book values.

Common mistakes

• Using book values for the assets. Goodwill is measured against the fair value of identifiable assets, so a building carried at cost may need to be entered at its current appraised value.
• Leaving existing goodwill in the asset figure. The target's own goodwill is not an identifiable asset; including it understates the goodwill from this deal.
• Entering the equity value as net assets and then also entering liabilities. The assets field is for total assets, and the tool subtracts liabilities itself, so entering net assets there subtracts liabilities twice.
• Forgetting assumed liabilities. A higher liability total lowers net assets and raises goodwill for the same price.
• Reading a negative result as an error. It means the price is below net asset value, and under the accounting rules this is recorded as a gain, not as goodwill.