Assuming there are no differences between the fair value and book value of recorded assets, the new partner's willingness to pay more than the proportionate book value of the new entity indicates

Question

Quizplus · Accepted Answer

If the new partner is willing to pay more than the proportionate book value of the new entity, it indicates that there is existing goodwill. Goodwill is an intangible asset that arises when a company is valued at a price greater than the fair value of its identifiable assets and liabilities. Therefore, the willingness to pay above the book value suggests that the new partner perceives future economic benefits beyond those that are recorded on the balance sheet, which can be attributable to goodwill.

Assuming There Are No Differences Between the Fair Value and Book