ACCA FR Syllabus A. The Conceptual And Regulatory Framework - Why use Fair values when calculating goodwill? - Notes 9 / 10
This is to ensure goodwill is calculated correctly
If a company has net assets of 100 in its accounts - these aren't necessarily at FV
Lets say the FV is actually 120
Now someone buys this company for 150 - how much is goodwill?
If FV of assets is used then it is 30 (this is the correct figure)