An economist suggests that the best measure of a firm’s income is the change in the market value of that firm’s shares over the period (adjusted for capital transactions). Furthermore, he argues, such a measure would avoid the reliability problems of attempting to fair- value individual assets and liabilities, particularly intangibles such as goodwill. In effect, he asks, why not fair- value the whole firm?

Required
a. How much information would net income calculated this way add to what the market already knows about the firm?
b. In your answer, consider whether fair valuation of self-developed goodwill would be decision useful. Could valuing self- developed goodwill at value in use (i. e., at management’s estimate of the present value of future abnormal earnings) be decision useful? Why or why not?