Assignment - Ethics and Goodwill

Bless Equipment Corporation, a retail farm implement dealer, has increased its annual sales volume to a level 10 times greater than the annual sales of the dealership when purchased over 10 years ago. At that time, a material amount of goodwill was recorded. The goodwill is still carried at its original value at purchase. The board of directors of Bless recently received an oer to negotiate the sale of the company to a larger competitor. As a result, the majority of the board members want to increase the current amount of goodwill on the balance sheet because of the larger sales volume developed through intensive promotion and the current market prices of the companys products. However, a few of the companys board members would prefer to eliminate goodwill altogether from the balance sheet to prevent possible misinterpretations. Goodwill was properly recorded when the business was acquired.

Instructions:

a. Discuss the meaning of the term goodwill. Do not discuss goodwill arising from consolidated statements or the conditions under which goodwill is recorded. (2 points)

b. Review the case and have a group discussion about the following:

1. Discuss the propriety of Increasing the stated value of goodwill prior to the negotiations. (2 points)

2. Discuss the propriety of Eliminating goodwill completely from the balance sheet prior to negotiations. (2 points)

c. From an ethical point of view, do you believe goodwill should be written down or left alone? Explain. (2 points)

Note: Everyone in the group may or may not agree on these points. Please summarize all thoughts accordingly and share your conclusions.