How is goodwill calculated under Swiss law?

Goodwill is the excess of the purchase price over the fair value of net identifiable assets. Under Swiss GAAP FER, goodwill must be amortized (unlike IFRS impairment-only). In practice, goodwill represents the value of customer relationships, brand, know-how, and earning power above tangible assets. ### Technical Explanation #### The Calculation $\text{Goodwill} = \text{Purchase Price} - \text{Fair Value of Net Assets (Substanzwert)}$ Example: A buyer pays CHF 6M for a company with CHF 2.5M in fair-value net assets. Goodwill = CHF 3.5M. #### Swiss GAAP FER Treatment Under Swiss GAAP FER 30, goodwill is capitalized and amortized over its estimated useful life (typically 5-20 years, maximum 20 years). Alternatively, goodwill may be offset directly against equity at acquisition — a popular choice for Swiss SME acquirers as it avoids annual P&L charges. #### Tax Treatment For Swiss tax purposes, goodwill amortization is tax-deductible if the goodwill is capitalized on the balance sheet. This creates a significant tax shield for the buyer: * CHF 3.5M goodwill amortized over 10 years = CHF 350,000 annual deduction * At a combined tax rate of ~15%, this saves CHF 52,500 per year * Total tax benefit: CHF 525,000 over the amortization period #### Impact on Deal Structure Buyers prefer asset deals partly because they can 'step up' the tax basis and claim goodwill amortization. In a share deal, historical goodwill already on the books continues its existing amortization schedule. New goodwill from the share acquisition cannot be capitalized at the target company level. #### Negative Goodwill (Badwill) When the purchase price is below fair-value net assets, the difference is 'negative goodwill' — typically indicating a distressed sale or hidden liabilities.