NEED FOR VALUATION OF GOODWILL :

In the case of partnership, the necessity of valuing goodwill arises in connection with the following:

1. When there is a change in the profit-sharing ratio among the partners;

2. When a new partner is admitted;

3. When a partner retires or dies; and

4. When the firm sells its business to a company or is amalgamated with another firm.

In the case of a joint stock company, the need for evaluating goodwill may arise in the following cases:

1. When the business or company is to be sold to another company or when the company is to be amalgamated with another company.

2. When, stock exchange quotations not being available, shares have to be valued for taxation purposes – gift tax, etc.;

3. When a large block of shares, so as to enable the holder to exercise control over the company concerned, has to be bought or sold; and

4. When the company has previously written off goodwill and wants to write it back.

5. When the company is being taken over by the government.