The Effect of Sales Terms on Goodwill, Risk and Return in Transfers of Closely Held Accounting Practices

Sack Elmaleh Michael
Additional contact information
Sack Elmaleh Michael: Columbia Union College

Journal of Business Valuation and Economic Loss Analysis, 2008, vol. 3, issue 1, 18

Abstract: Most sale proceeds from accounting practice transfers are allocable to goodwill despite the fact that neither sellers nor buyers generate significant profit from ordinary operations. Widely held valuation models hold that goodwill value is driven exclusively by profit and that accounting practice investors ought to demand returns higher than those realized by publicly traded equity investors. The existence of transferable goodwill without operating profit thus seems anomalous. This paper demonstrates that risk reducing sales terms explain these anomalies. As these sales terms are not necessarily unique to accounting practice transfers, the implications for valuation theory are quite significant.

Keywords: accounting practice transfers; sales terms; risk; operating profit; goodwill; leveraged buy-out approach; retained clients; seller financing; compensation vs. profit (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2202/1932-9156.1029 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:jbvela:v:3:y:2008:i:1:n:6

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/jbvela/html

DOI: 10.2202/1932-9156.1029

Access Statistics for this article

Journal of Business Valuation and Economic Loss Analysis is currently edited by Bradley T. Ewing and James J. Hoffman

More articles in Journal of Business Valuation and Economic Loss Analysis from De Gruyter
Bibliographic data for series maintained by Peter Golla ().