Points to consider when valuing goodwill
06/01/2022

Valuing goodwill is a complex process and there are many different methods which can be used and that vary from industry to industry. Goodwill is a way of placing a monetary value on the business's reputation and customer relationships. Or as HMRC say in their guidance, in accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired.

HMRC’s approach to valuation of goodwill suggests that there should be no expectation of a synergy-based value on an open market value basis unless synergy in a particular market is common place.

HMRC’s manuals state that when valuing the goodwill of a business the valuer should have regard to the following:

  • the full sale and purchase documentation relating to the transfer of both tangible and intangible assets
  • succession arrangements
  • the valuation approach used – e.g., capitalisation of profits, super profits or a trade specific method
  • the activities of the business and role of the owners within it
  • the financial statements/accounts (including the detailed trading and profit and loss account) for the 3 years before valuation
  • any other relevant financial information
  • appropriate yield and multiples of comparable companies and sectors
  • the commercial and economic background at valuation date
  • how the personal goodwill of the owner has been reflected in the valuation
  • any other relevant factors.

About Us

Established in 1991 based in Epsom Surrey, CWM use technology to its fullest extent enabling us to work with clients based anywhere, with maximum efficiency resulting in lower costs.

Accreditation

 icaew logo 

   

    

sage1   xero transparent

Contact Us

1a High Street
Epsom
Surrey
KT19 8DA
Phone: 01372 727333
Email: info@cwmaccountants.com

Newsfeed Search


Newsletter Sign Up

With our newsletter, you automatically receive our latest news by e-mail and get access to the archive including advanced search options!

» Sign up for the newsletter
» Login