Which statement best describes accounting for mergers?
A)Goodwill is amortized for shareholder reporting.
B)Goodwill is subject to impairment test for tax purposes.
C)Goodwill is no longer created in a merger.
D)Goodwill is subject to an amortization test and a majority vote of the board of directors.

Question

Quizplus · Accepted Answer

Goodwill is not amortized under current accounting standards; instead, it is subject to an annual impairment test. This test is to determine if the carrying value of goodwill is not greater than its fair value, and if it is, an impairment loss is recognized. This process is relevant for both financial reporting and tax purposes, although the specific implications for taxes can vary by jurisdiction.

Which Statement Best Describes Accounting for Mergers