Which of the following combination best demonstrates the value of goodwill?
I.purchase consideration of subsidiary
II.book value of net assets held by subsidiary
III.fair value of net identifiable assets
IV.contingent liabilities

Question

Quizplus · Accepted Answer

Goodwill represents the premium paid for the acquisition of a subsidiary, which is a result of factors like brand recognition, customer loyalty, and strategic advantages. The fair value of net identifiable assets represents the current value of the assets and liabilities acquired, and the contingent liabilities are potential future obligations that may or may not materialize. Therefore, to calculate goodwill accurately, we need to deduct the fair value of net identifiable assets and contingent liabilities from the purchase consideration. Hence, the best combination to demonstrate the value of goodwill is I less (III-IV).

Which of the Following Combination Best Demonstrates the Value of Goodwill