How to use the goodwill purchase price allocation calculator
- Enter the consideration transferred, which is the fair value of what the buyer paid.
- Add the fair value of any non-controlling interest and of any stake the buyer already held, if they apply.
- Enter the fair value of the identifiable assets, the identified intangibles and the liabilities assumed.
- Read the goodwill, or the bargain purchase gain if the result is negative, and the allocation table.
Formula
Total = consideration + non-controlling interest + earlier stake
Identifiable net assets = assets + intangibles - liabilities
Goodwill = total - identifiable net assets
A negative result is a bargain purchase gain
All amounts are fair values at the acquisition date. Goodwill is what is left after every identifiable asset and liability has been measured.
Paying $1,000 for a business
A buyer pays $1,000 for 100% of a business. The identifiable assets are worth $900, identified intangibles such as customer lists are worth $50, and the liabilities assumed are $200.
Identifiable net assets are $900 + $50 - $200 = $750, so goodwill is $1,000 - $750 = $250. That is 25.0% of the total allocated.
How the acquisition method works
When one company buys control of another, the buyer records every identifiable asset and liability of the target at fair value, not at the target's old book value. Whatever the buyer paid beyond those net assets is goodwill, an asset that stands for things that cannot be separately identified, such as the workforce and expected synergies.
If the buyer holds less than 100%, the part held by others, the non-controlling interest, is added to the total on the same fair value basis. If the buyer already owned a stake, that stake is also measured at fair value and added. The formula is the same either way.
When the answer is negative
A negative result means the identifiable net assets are worth more than everything given for them. Accounting standards call this a bargain purchase and ask the buyer to check that every asset and liability was identified and measured correctly before recording a gain. Often a missing liability or an overvalued asset explains it.
This page shows the arithmetic only. Deferred taxes, contingent consideration, how the non-controlling interest is measured and the rules of the reporting framework you use are all separate questions for your accountant or auditor.
Assumptions and limits
- All inputs are fair values at the acquisition date in one currency.
- Intangibles are the identified ones only. Goodwill itself is the result.
- Deferred taxes, contingent payments and measurement period adjustments are not modeled.
- The figures are examples. Nothing is uploaded.
Frequently asked questions
Is goodwill amortized?
That depends on the accounting framework. Some require annual impairment tests only, and others allow or require amortization. Check the rules that apply to you.
What goes in assets and what in intangibles?
Put receivables, inventory, property and cash in assets. Put separately identified items such as customer relationships, brands and technology in intangibles.
Do liabilities include debt?
Yes. Enter all liabilities assumed at fair value, including debt, payables and provisions.
Does the tool work for a partial purchase?
Yes. Enter what the buyer paid and the fair value of the interest held by others in the non-controlling interest box.