ABC Corporation acquires the assets and liabilities of XYZ Company. Holding everything else constant, which situation will result in ABC reporting less goodwill on this acquisition?

Question

Quizplus · Accepted Answer

When previously unreported identifiable intangible assets of XYZ are recognized in the acquisition, the fair value of XYZ's net assets increases. This reduces the excess of the purchase price over the fair value of net assets acquired, thus reducing the amount of goodwill recognized by ABC Corporation.

ABC Corporation Acquires the Assets and Liabilities of XYZ Company