straight talk
MARK BARNES: Knowing how to use know-how sets winners apart from almost-rans
One of the most difficult assets to value in the balance sheet is goodwill. It is more easily recognised by outsiders than valued by accountants. An intangible asset, it is the premium above the fair value of the other assets that come together to manifest the value of an operating entity. Bankers don’t like it and auditors wrestle over how to justify its carrying value, but any acquirer of the company will have to pay for it. As mysterious as it may be to pin down, it is this premium to the net-asset value that differentiates the winners from the also-rans. What, after all, is a collection of assets without a vision, leadership and a plan to put them to work to generate a return greater than the sum of their parts? Goodwill is a collective noun for many of its constituent parts, incorporating intellectual property, institutional memory and know-how. Though the calculations to justify the carrying value of goodwill are usually based on the discounted present value of future free cas...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.