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Negative Goodwill
Yes, I believe goodwill can have a negative balance. We call this negative goodwill as “Bargain Purchase”.
It’s a difference between the purchase price paid for an asset and its actual fair market value. Although you should know that it’s an extremely rare case scenario.
Negative Goodwill v/s Goodwill
I think if you get an idea of the difference between the two you will be in a better position to understand why it arises and what exactly does it mean.
In case of a bargain purchase the Purchase Price of an Asset < its Fair Market Value
the above statement could be interpreted with the help of a below-mentioned example
The company ABC faced financial distress for since a few years and hence the board of directors had only 2 alternatives left i.e either to sell the company or file for liquidation.
The company was hence sold for an amount lower than its fair market value
It is reflected from below mentioned illustration
You would doubt that even though the goodwill can have a negative balance how shall it be presented in the Financial Statements. Moving ahead –
Negative Goodwill in an income statement
It should be recognized as a “gain on acquisition “ in the income statement of an acquirer.
The below image would be of some help-
Negative Goodwill in a Balance Sheet
It can be shown as a part of liability or as a negative balance in the books of Seller Company since it unfavourable for such company whereas goodwill is shown as an intangible asset. Alternatively, such negative balance can also be shown as a negative balance under the intangible asset.
I generally follow the alternative approach to present negative goodwill under the head of intangible asset but you can follow any method you are comfortable with since both are acceptable in the industry.
If you are still confused about how to present negative goodwill in a balance sheet perhaps the below-stated example may be of some help

Aastha Mehta