Asset write-up VS Goodwill

TheZhanMan's picture
Rank: Baboon | 172

In an acquisition where you pay above the book value, I understand that goodwill is created aside with writing up the assets. However, how do you determine what % of the surplus value becomes goodwill, and what % becomes asset write-up?

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Mar 15, 2019

When you're doing a quick merger model you just assume certain % for asset writeups such as inventory,PPE, and etc.

When you're actually doing the nitty gritty you would go line-by-line and assess fair market value compared to book value and write up accordingly. Usually you wouldn't judge this by yourself, probably help of consultants/accountants to really get the accurate write up amount. Then the rest will be allocated to goodwill. So it isn't necessarily that you determine the % but rather you determine the actual value of the asset and goodwill ends up becoming a plug.

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Mar 15, 2019
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