For financial reporting purposes, goodwill resulting from an acquisition
A) Must equal the fair market value of the target firm's assets
B) Immediately impacts the acquirer's profits
C) Is expensed over 20 years
D) Is reviewed annually or whenever there is reason to believe it has lost value and amortized to the extent its value has declined
E) Never affects the profits of the acquirer

Question

Quizplus · Accepted Answer

Goodwill resulting from an acquisition is reviewed annually or whenever there is reason to believe it has lost value and amortized to the extent its value has declined. It is not expensed over a fixed period of time, nor does it immediately impact the acquirer's profits. Goodwill is also not required to equal the fair market value of the target firm's assets, and it can affect the profits of the acquirer if it is impaired.

For Financial Reporting Purposes, Goodwill Resulting from an Acquisition