Enter the total purchase price (consideration transferred) ($) and the fair value of net identifiable assets ($) into the Goodwill Calculator. The calculator will evaluate and display the goodwill amount (if the result is negative, it indicates a bargain purchase amount rather than “negative goodwill”).
Goodwill (Simplified) Formula
The following simplified formula is used to estimate goodwill in a business acquisition when the total purchase price (consideration) and the fair value of net identifiable assets are known (for example, a 100% acquisition with no noncontrolling interest or previously held equity interest).
GW = PP - FVA
- Where GW is the goodwill amount ($)
- PP is the total purchase price ($)
- FVA is the fair value of net identifiable assets ($)
To calculate goodwill, subtract the fair value of net identifiable assets from the total purchase price. If the result is negative, it indicates a bargain purchase amount (a gain) rather than negative goodwill.
How to Calculate Goodwill?
The following example problems outline how to calculate goodwill.
Example Problem #1:
- First, determine the total purchase price ($). The total purchase price ($) is given as 9000.
- Next, determine the fair value of net identifiable assets ($). The fair value of net identifiable assets ($) is provided as 2000.
- Finally, calculate the goodwill using the equation above:
GW = PP – FVA
The values given above are inserted into the equation below:
GW = 9000 – 2000 = 7000 ($)
Example Problem #2:
The variables needed for this problem are provided below:
total purchase price ($) = 10000
fair value of net identifiable assets ($) = 7000
Entering these values and solving gives:
GW = 10000 – 7000 = 3000.00 ($)
