Question

What do you mean by purchasing years?

• A. No. of years in which goodwill is purchased.
• B. No. of years the goodwill is expected to remain.
• C. Both of these
• D. None of these

Answer 1

The correct option is B No. of years the goodwill is expected to remain.

When we purchase a business we will have to pay for the goodwill along with the value of the net assets. Goodwill comes in existence after years of profitability. That is subjected to agreement between the buyer and the seller. This agreed number of years is the 'number of years purchase' which is used for valuation of goodwill.