What is goodwill in SAP FI-LC - Consolidation?

SAP Term: goodwill

• Component: FI-LC

• Component Name: Consolidation

• Description: The goodwill is a differential amount on the assets side and arises during the consolidation of investments. It is recorded as an intangible asset and amortized over an estimated remaining life, as predetermined, by law or internal company rules. During first consolidation, goodwill is calculated as the difference between the group share-related investment book values of the direct parent companies and the group share-related equity of the company being consolidated, while taking hidden reserves fair value adjustments into account. Possible reasons for goodwill are an earning capacity value that deviates from the net asset value of the acquired company as well as additional benefits transfer of know-how, customer contacts, elimination of competitors, and on from the acquiring company's point of view.

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• Key Concepts: 
  Goodwill is an intangible asset that is created when one company acquires another for a price higher than the fair market value of its assets. It is recorded as an asset on the balance sheet of the acquiring company and is used to represent the value of the acquired company's reputation, customer base, and other intangible assets. In SAP FI-LC Consolidation, goodwill is used to represent the difference between the purchase price of an acquired company and its fair market value. 
  
  How to use it: 
  In SAP FI-LC Consolidation, goodwill is recorded as an asset on the balance sheet of the acquiring company. The amount of goodwill is calculated by subtracting the fair market value of the acquired company's assets from the purchase price. This amount is then recorded as an asset on the balance sheet of the acquiring company. 
  
  Tips & Tricks: 
  When recording goodwill in SAP FI-LC Consolidation, it is important to ensure that all relevant information about the acquisition is accurately recorded. This includes details such as the purchase price, fair market value of assets, and any other relevant information. Additionally, it is important to ensure that any changes in goodwill are accurately reflected in the financial statements. 
  
  Related Information: 
  Goodwill can also be used to represent other intangible assets such as brand recognition or customer loyalty. Additionally, it can be used to represent certain liabilities such as contingent liabilities or environmental liabilities. It is important to note that goodwill should not be confused with other intangible assets such as patents or copyrights.