How is goodwill accounted for?

Canton Bern To Home page

1 Definition of goodwill

Goodwill corresponds to the amount that a buyer of a company is willing to pay, taking into account future earnings expectations over the value of all tangible and intangible assets after deducting debts. The goodwill is thus calculated from the difference between the purchase price and the intrinsic value.

The definition shows that goodwill is part of a company's total assets (assets and debts of a business). Goodwill alone cannot be the subject of a contribution in kind (to a partnership or corporation) because it cannot be valued or utilized without belonging to a business group of assets.

2 activation ability

The goodwill may only be capitalized under both commercial and tax law if it was actually acquired as part of a company acquisition (derivative goodwill). Goodwill is also deemed to have been purchased if it is brought in as part of the contribution in kind of a business (transfer of a business or part of a business to a legal entity). For tax purposes, the purchased goodwill must be capitalized. The value to be capitalized results from the purchase price of the business according to the purchase price principle: purchase price (possibly increased by the assumed debts) minus purchase prices of the individual assets (asset values) results in the purchase price of the goodwill. The capitalized goodwill can then be written off for tax purposes in accordance with the provisions of the Depreciation Ordinance (AbV).

The self-created (original) goodwill cannot be capitalized. The reason for this lies in the fact that the original goodwill - in contrast to the derivative - no expenditure can be directly allocated; an activation would therefore lead to the disclosure of an unrealized appreciation gain.

3 Goodwill on acquisition of participations

Any goodwill paid when purchasing a company must be capitalized on the investment account for tax purposes (see 2.). The added value paid forms part of the acquisition or production costs of the participation. A separate disclosure of goodwill with scheduled depreciation is not recognized for tax purposes.