Treatment of Goodwill as per AS

This query is : Resolved

ramesh (Querist)
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14 June 2008 If 1 partner Mr.X retires from Firm having 3 partners. Total capital of Mr.X in firm is 10 lacks, but on retirement Firm pays him Rs. 11 lacks.Whether Rs. 1 lack can be treated as Goodwill as per Accounting Standard and shown under fixed asset in Balance Sheet ( as this is Goodwill for which firm has paid ) or will be considerd as Internally generated goodwill

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PC-www.bharadwajinstitute.com (Expert)
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19 June 2008 The premium paid for the retiring partner towards goodwill Rs. 1 lakhs should not be treated as an asset.

It should be adjusted to other partners in the Gaining ratio i.e. debited to the continuing partners in the gaining ratio.

However, It is an internally generated goodwill only.