When is the valuation of goodwill required in partnership accounts?

When the firm is earning super profits

Valuation of goodwill is typically required in partnership accounts when the firm is earning super profits. Super profits are the profits that exceed the normal rate of return on the firm's capital investment. When a firm consistently earns higher profits than the average or expected returns, it indicates the presence of goodwill. Valuation of goodwill involves determining the monetary value of this intangible asset. It assesses the reputation, customer loyalty, brand recognition, business connections, and other factors that contribute to the firm's ability to generate excess earnings.