Which of the following is a true statement about the accounting treatment of goodwill?
A) Accountants start recording the goodwill of a company as soon as the company starts, and adjust the value every year to reflect the changes in the attitudes of the company's customers.
B) Goodwill is always shown on the balance sheet at its fair value.
C) When one company acquires another, accountants find the value of goodwill by comparing the amount paid to acquire the company with the net fair value of the assets and liabilities acquired.
D) Goodwill is never reduced for impairment.

Question

Quizplus · Accepted Answer

When one company acquires another, accountants find the value of goodwill by comparing the amount paid to acquire the company with the net fair value of the assets and liabilities acquired. Goodwill may be reduced for impairment if the value of the acquired company's assets and liabilities change and the fair value of the goodwill is less than its carrying amount. Goodwill is not recorded until one company acquires another. Goodwill may not always be shown on the balance sheet at its fair value as it may be subject to impairment testing.

Which of the Following Is a True Statement About the Accounting