Asked by Aksarapak Bunchongpru on May 14, 2024
Verified
Goodwill represents
A) management's estimate of the value of the firm's "unidentified" intangible assets.
B) the difference between the acquisition value of an acquired business and the fair value of its identifiable net assets.
C) the difference between the acquisition value of an acquired business and the book value of its identifiable net assets.
D) the sum of the acquisition value of an acquired business and the fair value of its identifiable net assets.
Goodwill
An intangible asset that arises when a business is acquired for more than the fair value of its net identifiable assets, representing the premium paid for the company’s reputation, brand, or other unique qualities.
Identifiable Net Assets
Assets that can be separated from the company and sold, transferred, licensed, rented, or exchanged, either individually or together with a related contract.
- Differentiate between amortizable intangible assets and goodwill.
Verified Answer
CM
Carley MahurinMay 18, 2024
Final Answer :
B
Explanation :
Goodwill represents the difference between the acquisition value of an acquired business and the fair value of its identifiable net assets. It represents the value of intangible assets that cannot be separately identified and valued, such as brand recognition, customer relationships, and intellectual property. Management's estimate of the value of intangible assets is reflected in other assets or expenses on the balance sheet or income statement, respectively. Goodwill is recognized on the balance sheet as an asset, but is subject to periodic impairment testing to ensure it has not lost value over time.
Learning Objectives
- Differentiate between amortizable intangible assets and goodwill.