Valuation of Goodwill does not arise in which of the following circumstances?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) - Dissolution of Partnership firm.
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. Amalgamation of partnership firms.
* At the time of dissolution of firm, goodwill is not valued as books are closing in case of dissolution of firm.