Goodwill recorded by the subsidiary at the acquisition date is?
A)Added to the goodwill recognized by the parent at the acquisition date.
B)Deducted from the net fair value of the identifiable assets and liabilities of the subsidiary in the performing the acquisition analysis.
C)Is amortized over 25 years.
D)An impairment loss is recognized by the subsidiary for the entire amount.

Question

Quizplus · Accepted Answer

Goodwill recorded by the subsidiary at the acquisition date is deducted from the net fair value of the identifiable assets and liabilities of the subsidiary when performing the acquisition analysis. This is because the parent company has already recognized the total goodwill of the acquisition in its consolidated financial statements. Therefore, the subsidiary's recognized goodwill needs to be adjusted to reflect the fair value of the identifiable assets and liabilities of the subsidiary. Goodwill is not amortized over a fixed period; instead, it is tested annually for impairment.

Goodwill Recorded by the Subsidiary at the Acquisition Date Is