Hi again joby …
With regard to “Goodwill” on the Balance Sheet, an important point to remember is the fact that the company has PAID for that item, irrespective of whether it paid too much or too little according to Net Tangible Assets.
The Goodwill represents an amount of money that was paid for something, in much the same way that the company spent money on a fixed asset such as an office block.
So the figure must stand, and must form part of “Employment of Capital”, and it resides in Fixed Assets.
Yes, Fixed Assets + Current Assets = Total Assets.
There are no other types of “Assets”.
With regard to the possible Impairment adjustment that could occur, it appears that an adjustment takes place on the Income Statement.
As far as I’m aware, if the Fair Value is now less than the stated value by, say, $10000, then $10000 is deducted on the Income Statement.
This will, of course, affect a company’s Bottom Line, which will, in turn, reflect in the Reserves on the Balance Sheet, which will, in turn, affect Capital Employed, which is equal to Employment of Capital. |
