How should goodwill acquired in a business combination be allocated?
A)Proportionately to assets
B)Proportionately to fair-value increments
C)To cash-generating units
D)It is not allocated.

Question

Quizplus · Accepted Answer

Goodwill acquired in a business combination should be allocated to the cash-generating units (CGUs) that are expected to benefit from the combination, which may not necessarily be in proportion to the fair-value increments of the assets. This is because goodwill represents the future economic benefits that are not individually identifiable, and so the allocation should be based on the expected performance of the CGUs after the combination.

How Should Goodwill Acquired in a Business Combination Be Allocated