he book value of the acquired company.2 In this traditional context, goodwill is defined as a representation of the future earning power of the firm that is, in turn, determined by the capitalization at an assumed rate of interest of anticipated earnings in excess of the long term average rate of return in the industry of which the acquired firm is a part.3 This theoretical definition, however, is applied after the fact, because, in truth, the actual amount of goodwill is the amount negotiated by buyer and seller.4 Within this context, thus, goodwill is an intangible assets with characteristics that differentiate it from other intangible assets.
Goodwill has been viewed traditionally as a special type of intangible asset one that may not be amortized and deducted under federal income tax law in the United States.5 Other
2"Statement of Standard Account Practice Exposure Draft 47 Accounting for Goodwill," Accountancy, 105 (March 1990): 162.
3"SSAP 22 (Revised): Accounting for Goodwill," Accountancy, 104 (October 1989): 185.
4G. M. Gomes, and J. F. Morgan, "Unfair Just Compensation: Reforming Eminent Domain Law for Small Business," Journal of Small Business Management, 27 (October 1989): 18.
5Laura Saunders, "Procrustean Bed," Forbes, 30 September 1991, 142.intangible assets may be so amortized and deducted from earnings in the determination of federal income tax liability. Even in the simplest of times
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