MIP Incorporating!

deanshepherd

stevo5678 wrote: »

There is no requirement per the standards to create goodwill in this instance. It would either be for a tax advantage or to build up your balance sheet in day one.

And clients care more about the standards than their tax bill.

In this context It is artificially created goodwill in accounting terms as we are talking about a shuffle of papers between the same person (not entity).

Any sale of a business is a shuffle of papers between two separate legal persons. Nothing artificial about it. If it was artificial then HMRC would not allow it.

Plus true and fair is only specifially referred to in audit terms

Spoken like a true auditor!

Whether or not you should create/recognise the goodwill is another thing.

And the man from Del Monte say..

deanshepherd

I admire the way you are defending your firms apparent stance on not bothering to value goodwill for every incorporation. That is certainly typical of every accountancy firm I have worked for, good and bad. It may also be that way because of the size of your firm, and all those ICAEW and registered auditor annual subscriptions you have to pay, making it uneconomical for you to look into it for each and every client.

However, I am a firm believer in providing every client with a Rolls Royce service (not just the high rollers) so, in my humble opinion, ignoring the possibility of goodwill for any client is just giving up an opportunity both for you and your client.

I will even do it on a 'no win, no fee' basis and use an external valuer to agree the figures with HMRC where the client wants us to do so.

Monsoon

deanshepherd wrote: »

However, I am a firm believer in providing every client with a Rolls Royce service (not just the high rollers) so, in my humble opinion, ignoring the possibility of goodwill for any client is just giving up an opportunity both for you and your client.

100% agree. I seem to be doing that a lot lately

Bluewednesday

As a matter of interest Dean can you say what process you go through and how you value it? I've read the articles that ACCA wrote recently regarding it but wondered if there were specific methods for specific industries. As you can tell it's not something I have yet had to do!!!

Dean

...QAD visit :001_smile:

jamesm96

I have to say I get quite excited (I'm getting old!) when an unincorporated client comes along who would benefit from incorporating... Most of the clients I deal with these days are already incorporated so a nice juicy valuation which gives rise to a nice credit on the DLA and allowable amortisation charge gives me a great opportunity to make my client very happy indeed!

deanshepherd

Bluewednesday wrote: »

As a matter of interest Dean can you say what process you go through and how you value it? I've read the articles that ACCA wrote recently regarding it but wondered if there were specific methods for specific industries. As you can tell it's not something I have yet had to do!!!

The best way is to find evidence of businesses in that particular sector being sold on the open market. If there is a very active market, like with accountancy fees, it is dead easy to prove what an independent 3rd party would pay for such a business without having to conduct any detailed valuation.

In the absence of the above, then this is a handy little tool that a colleague of mine uses to generate valuations using a variety of popular valuation methods. You can then choose one that you believe is most appropriate for that type of business and make any adjustments for goodwill attaching to the owner.

When valuing a business (and I am no expert here) you always have to look at the reason for valuation first. Is it for tax purposes? Is it for selling to a 3rd party? Is it merely for letting your clients know what their business might be worth?