Goodwill is an intangible asset. There are a variety of recommendations about how intangible assets should...

Goodwill is an intangible asset. There are a variety of recommendations about how intangible assets should be included in the financial statements. Discuss the recommendations for proper disclosure of goodwill. Include a comparison with disclosure of other intangible assets

Expert Solution

Goodwill is recorded in a situation when the purchase price is higher than the sum of the fair value of all identifiable tangible and intangible assets purchased in the aquisition and the liabilities assumed in the process.

Unlike other intangible assets goodwill is perceived to have an indefinite life while other intangible assets have a definite life (patents,copyrights,customer lists,literary works..etc).

Indefinite life intangibles are not amortized but are tested for impairment annually and is written down when impairment has occured. A potential impairment of goodwill exists when the fair value of the reporting entity is less than its carrying value. When it is so an impairment loss is recognized. An impairment loss cannot exceed the carrying value of goodwill, and after a loss is recognized, it cannot be reversed.

Definite life intangible assets are initially measured at cost and amortized on a systematic basis over their useful life.

ekkarill92 answered 4 months ago

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