Discussion Forum 2
We will research some of the more famous accounting scandals. At the opposite end, organizations that follow GAAP and actively engage their business with the community develop goodwill with their constituents. Over time, this goodwill becomes valuable and is an asset that has value. In fact, when companies sell or merge, goodwill can be a defined as a component of the selling price.
Provide an example of a company well known for its generosity and community involvement. Then, describe what you think would be the best method to account for goodwill when preparing a balance sheet and statement of reviews.
Discussion Forum 2
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Discussion Forum 2
Starbucks is the company well known for its generosity and community involvement. It is a coffee selling–giant based in the USA- Seattle and had 27,000 Starbucks coffee shops worldwide by 2017 (Robbins, 2021). It strives to give back to the community through the Starbucks Foundation that works by providing grants to nonprofit organizations within and outside Seattle. The foundation donated $7 million to create grants for generating community service efforts, underprivileged youth, and support farming communities producing coffee, tea, and cocoa worldwide (Robbins, 2021). In 2019, it donated $5 million for disaster management. With the entry of COVID-19 in 2020, Starbucks donated $3 million to support community responses to the pandemic globally (Starbucks’ Stories and News, 2021). Currently, Starbucks plans to establish a $100 million fund to invest in small businesses and community development projects in areas populated by Blacks, Indigenous Americans, and people of color (Starbucks’ Stories and News, 2021). Such acts depict Starbucks as the most generous and community-involved company.
Goodwill is an intangible asset realized when a company acquires another one entirely. It comes in form of reputation, domain names, brand, and intellectual property that is hard to account for financially (Lewis, 2020). The best way to account for goodwill may be through the determination of the fair value of the company’s assets. Since the book value is mostly not equal to the market value/fair value, the first step is to find those values. The fair value is calculated by determining the values of the acquired assets and adding them. The value of the business liabilities is then subtracted from that of the assets to get the fair value. The fair value is then subtracted from the purchase price to get goodwill (Lewis, 2020).
References
Lewis, R M. (2020). How to Account for Goodwill. wikiHow. https://www.wikihow.com/Account-for-Goodwill
Starbucks’ Stories and News. (2021). The Starbucks Foundation. https://stories.starbucks.com/stories/the-starbucks-foundation/
Robbins, T. (2021). Companies that give back. Robbins Research International, Inc. https://www.tonyrobbins.com/giving-back/companies-give-back/