What is Negative Goodwill? - YouTube

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videos thank you for joining us on our educational  series today's topic covers negative goodwill and  

i'm sage for kalkine media what do you mean by  negative goodwill well negative goodwill or ngw  

also known as the bargain purchase amount is the  money paid by a company when it purchases another  

company or its assets at a significantly lower  price compared to its actual fair market values  

and typically the bargain purchase amount is the  gap between the price at which an asset is bought  

and its actual fair market value usually negative  goodwill symbolizes at the party or company being  

sold as either distressed or has become bankrupt  and hence the only option available before it  

is to discharge its assets for a portion of its  worth it is to be noted that negative goodwill is  

not always beneficial for the buyer and negative  goodwill is contrary to goodwill a situation where  

one firm pays a premium for the assets of another  firm and besides the buying parties must declare  

negative goodwill in their financial statement  noticeably both goodwill and negative goodwill  

come under generally accepted accounting standards  or gaap explain negative goodwill in detail  

in accounting the concepts of goodwill  and negative goodwill are created  

to recognize the challenges involved in  measuring the value of non-monetary assets  

like the company's reputation licenses patents and  consumer base these intangible assets of a company  

vary from the tangible assets such as equipment  building machinery or inventory and mainly when  

a company acquires another company or its assets  the transactions include goodwill where the amount  

paid by the purchaser exceeds the value  of the selling party's tangible assets  

however negative goodwill occurs very rarely where  the value of non-monetary or intangible assets  

should be recorded as a profit on the buyer's  financial statement the gaap make it mandatory  

for the companies to report their goodwill and  negative goodwill under the financial accounting  

standards board or fasb statement number 141  in addition when the value of all the acquired  

assets of a company is more than the company's  purchase price it is said to be a bargain purchase  

and when the buyer reports gains for financial  accounting purposes in a bargain purchase this  

profit leads to an immediate increase in the net  income furthermore tracking negative goodwill  

is important because it provides an investor a  more comprehensive picture of his company's value  

and any business deal that includes negative  goodwill increases recorded assets net income  

potentially misrepresenting performance metrics  such as return on assets and return on equity  

which would seem lower because of this and  if you'd like this information please like  

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