Acta academica karviniensia 2017, 17(2):17-25 | DOI: 10.25142/aak.2017.010

IS THERE A WAY TO MAKE GOODWILL A MORE SUITABLE SUBJECT OF THE COMPANY DECISION-MAKING?

David Čevela

University of Economics in Prague, Faculty of Finance and Accounting, W. Churchill Sq. 4, 130 67 Prague, Email:xcevd00@vse.cz

The paper examines goodwill as a potential subject of management decision-making. It begins with a premise that although goodwill can be of a very high value it is often kept in books without much interest of a company management. This reflects the fact that goodwill emerges as a result of past events and is therefore in only a very limited way useful for company management, which is mostly concerned with a company's future rather than the past. The paper therefore identifies primary (i.e. internally generated) goodwill as a better subject of management than the secondary (i.e. purchased) goodwill. It introduces possible method of its valuation and proposes its allocation to individual cash generating units as a possible technique leading to valuable information to be used by management in managing a company's performance.

Keywords: allocation, goodwill valuation, primary goodwill, secondary goodwill

JEL classification: M41

Received: January 23, 2017; Accepted: May 31, 2017; Published: June 30, 2017  Show citation