In accounting,goodwill

Question

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Goodwill is recorded when a company purchases another business and the purchase price exceeds the fair market value of the net assets acquired. It is not amortized over its useful life but rather tested for impairment at least annually using a fair value approach. Goodwill cannot be arbitrarily recorded based on achieving a level of net income that exceeds the industry average, as this does not meet the criteria for recognition under Generally Accepted Accounting Principles (GAAP). Goodwill also cannot be expensed in the period it is recorded because it represents an intangible asset with potential future benefits for the company.

In Accounting,goodwill