Goodwill represents the intangible value of a business beyond its physical assets, including brand reputation, customer loyalty, and proprietary technology. It is calculated as the difference between a business's total value and the value of its net tangible assets. For service businesses like laboratories, goodwill is often estimated as the EBITDA multiplied by an industry-standard factor, such as 7-8 times EBITDA for US labs. The sale of goodwill generates capital gains tax. Valuing goodwill requires assessing the reasonableness of the implied value based on company-specific factors.

1. Valuation of Goodwill Presented by: Ashutosh Mishra MBA-1stsemester

4. Section 55 of the Income Tax Act specifically laid down goodwill as a capital asset, the sale of which would attract capital gains tax. The fact that goodwill is a capital asset gives rise to useful ideas for tax planning. Level of Goodwill Valuation The level of goodwill implied by valuation should always be assessed for reasonableness. A reasonable level of goodwill varies from company to company.

7. potential to generate future income

8. client loyalty

9. partner and staff continuity

11. acquisition/disposal of a practice

12. partners joining/leaving a practice.Valuation of goodwill is a very subjective matter and in the majority of cases there is no right or wrong answer. In certain instances a low valuation may be more beneficial than a higher one, and vice versa.

13. Valuations done ! In R. C. Cooper vs Union of India (AIR 1970 SC 564), the Supreme Court observed that goodwill is that component of the total value of the undertaking which is attributable to the ability of the concern to earn profits over a course of years or in excess of normal amounts because of its reputation, location and other features. When goodwill is sold, explained the Calcutta High Court in GulaldasMullick Vs. GaneshdasDamani (AIR 1957 Cal 280), it would enable the purchaser to trade as recognised successor to the business.

14. The International Accounting Standards 22 on business combinations, AS 14 on amalgamations and FRS 10 (UK GAAP) on business combinations deal with problem of accounting for goodwill and other intangible assets. According to IAS 38, internally-generated goodwill should not be recognised as an asset at all. As per IAS 22, cost of goodwill represents a payment made by the buyer in anticipation of future profits. A Noticeable Fact

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18. References The Valuation of Businesses , Shares & other Equity –Wayne Lonergan The Internet