If a company has goodwill on its books:
A) the goodwill is amortized over a period determined by the Board of Directors.
B) the goodwill must be increased to its market value on a yearly basis.
C) a loss must be recorded if the goodwill has decreased in value.
D) it must expense it immediately.

Question

Quizplus · Accepted Answer

Goodwill is an intangible asset that arises when one company purchases another for a premium value above its net assets. The value of goodwill does not decline over time, but it may decline if there is a decrease in the value of the business it represents. In such a case, the goodwill must be impaired, and a loss must be recorded in the income statement. The goodwill is not amortized but rather tested for impairment annually or when there is an indication of impairment. Therefore, option C is the right answer.

If a Company Has Goodwill on Its Books