A newly acquired subsidiary had pre-existing goodwill on its books.The parent company's consolidated balance sheet will
A)not show any value for the subsidiary's pre-existing goodwill.
B)treat the goodwill similarly to other intangible assets of the acquired company.
C)not show any value for the pre-existing goodwill unless all other assets of the subsidiary are stated at their full fair value.
D)always show the pre-existing goodwill of the subsidiary at its book value.

Question

Quizplus · Accepted Answer

When a company acquires a subsidiary, the pre-existing goodwill on the subsidiary's books is not recognized on the consolidated balance sheet. Instead, any goodwill recognized in the acquisition is calculated based on the purchase price and the fair value of identifiable net assets acquired. Pre-existing goodwill is essentially eliminated in the consolidation process.

A Newly Acquired Subsidiary Had Pre-Existing Goodwill on Its Books