Which of the following is not true about goodwill?
A)Goodwill reflects the value of knowledgeable employees.
B)Goodwill reflects the value of a reputation for quality products.
C)Under IFRS, goodwill has an indefinite life, and firms do not amortize the amount recognized as goodwill.
D)Firms must test goodwill annually for a loss in value.
E)Under U.S.GAAP, goodwill has an indefinite life, and firms amortize the amount recognized as goodwill.

Question

Quizplus · Accepted Answer

Under U.S.GAAP, goodwill has an indefinite life, but instead of testing for impairment, firms must amortize the amount recognized as goodwill over a period of time, which could be up to 10 years. This is different from IFRS, where there is no amortization of goodwill, and firms must test annually for impairment. Option A and B are true statements about goodwill, and option C and D are true statements about the accounting treatment of goodwill under IFRS.

Which of the Following Is Not True About Goodwill