The genesis of the “goodwill” concept in financial and managerial accounting

Abstract

The paper provides an analysis of the evolution of the “goodwill” concept from 1982 up to now on the basis of definitions found in foreign and national literature. The study focuses on conceptual foundations for accounting goodwill at an enterprise.Within the study the following general and special research methods for describing economic phenomena and processes are applied: historical and logical – to identify evolutionary approaches to defining the concept of “goodwill”; generalization, grouping and comparison – to study the essence of economic concepts and reinforce their definitions; analysis, synthesis, induction and deduction – to describe the main features of goodwill which reflect the economic nature of the concept.Based on foreign and national research literature, a review of definitions for the concept of “goodwill” is presented in the chronological order. In the article, a reinforced definition is formulated, which is tailored to the current environment of doing business and requesting for information. The evolution of conceptual foundations for accounting goodwill which complies with international and national standards is described. The structure of goodwill is graphically de- picted in accordance with International Financial Reporting Standard 3 Business Combinations. It is found that goodwill at an enterprise is not always economically justified and does not indicate the existence of non-economic amenities.A significant difference is found between the interpretation of the concept of “goodwill” in accounting and economic interdisciplinary aspects. Speculative reasons for the positive variance in the implementation of integration agreements are described, which confirm the discrepancy between economic and accounting definitions of goodwill. It is pointed out that there is a need for the convergence of existing approaches in order to unify the conceptual foundations of goodwill as an accounting concept. It is proposed to record the internal goodwill on accounts as an economic embodiment of non-economic amenities that the enterprise owns.