Need for valuation of goodwill arises in the following circumstances:

(A) Admission of a new partner
(B) Change in profit sharing ratio among the existing partners
(C) Dissolution of the partnership firm
(D) Death of a partner

Choose the correct answer from the options given below:

(A), (B), (C) and (D)

The correct answer is Option (3) → (A), (B), (C) and (D).

Goodwill is an intangible asset that represents the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. Normally, the need for valuation of goodwill arises at the time of sale of a business. But, in the context of a partnership firm it may also arise in the following circumstances:

• 1. Change in the profit sharing ratio amongst the existing partners;
• 2. Admission of new partner;
• 3. Retirement of a partner;
• 4. Death of a partner;
• 5. Dissolution of a firm involving sale of business as a going concern. 
• 6. Amalgamation of partnership firms.

Note: The given answer is as per the NTA answer sheet. However, there is an ambiguity in respect of "(C) Dissolution of the partnership firm". As per NCERT, valuation of goodwill can be done in case of dissolution of a firm involving sale of business as a going concern (not all cases of dissolution of firms).