Accounting for acquired goodwill has been a controversial issue for many years. In the United States

Accounting for acquired goodwill has been a controversial issue for many years. In the United States, the amount of acquired goodwill is capitalized and not amortized. Globally, the treatment of goodwill varies significantly, with some countries not recognizing goodwill as an asset. Professors Johnson and Petrone, in “Is Goodwill an Asset?” discuss this issue.

Required:

1. In your library or from some other source, locate the indicated article in Accounting Horizons, September 1998.

2. Does goodwill meet the FASB’s definition of an asset? 3. What are the key concerns of those that believe goodwill is not an asset?

Solutions

Expert Solution

Requirement 1

Goodwill does meet the criteria in Concepts Statement No. 5for initial recognition as an asset. Goodwill does represent “future economic benefits” that are in the “control” of the enterprise and that have arisen from a “past transaction or event.”

Requirement 2

Some believe that goodwill is not an asset because of concerns about (1) equating costs and assets, (2) exchangeability of goodwill, and (3) controllability.

Goodwill does meet the criteria in Concepts Statement No. 5for initial recognition as an asset.

Junaid answered 2 years ago

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