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Questions and Answers
What is goodwill in accounting?
What is goodwill in accounting?
Goodwill in accounting is an intangible asset associated with a business combination.
When is goodwill recorded in accounting?
When is goodwill recorded in accounting?
Goodwill is recorded when a company acquires (purchases) another company and the purchase price is greater than 1) the fair value of the identifiable tangible and intangible assets acquired, minus 2) the liabilities that were assumed.
How is goodwill reported on the balance sheet?
How is goodwill reported on the balance sheet?
Goodwill is reported on the balance sheet as a long-term or noncurrent asset.
What is the requirement for amortizing goodwill for U.S. companies since 2001?
What is the requirement for amortizing goodwill for U.S. companies since 2001?
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What is the frequency of the goodwill impairment test?
What is the frequency of the goodwill impairment test?
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Study Notes
Goodwill in Accounting
- Goodwill is an intangible asset that represents the excess value of a business over its net asset value.
Recording Goodwill
- Goodwill is recorded in accounting when one company acquires another company and the purchase price is greater than the net asset value of the acquired company.
Reporting Goodwill on the Balance Sheet
- Goodwill is reported on the balance sheet as a non-current asset, and it is typically listed separately from other intangible assets.
Amortizing Goodwill
- Since 2001, U.S. companies are not required to amortize goodwill, but instead, they must perform an annual impairment test to assess the value of goodwill.
Goodwill Impairment Test
- The goodwill impairment test is performed at least annually, or more frequently if circumstances indicate a potential impairment.
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Description
Test your knowledge of accounting with this quiz on goodwill. Assess your understanding of how goodwill is recognized and recorded in business combinations, and its significance as an intangible asset.
