Goodwill is recognized only when the purchase price of a company is greater than the fair value of the assets of that company.

Question

Quizplus · Accepted Answer

Goodwill arises in a business combination when the purchase price paid by the acquirer exceeds the fair value of the identifiable assets, liabilities, and contingent liabilities acquired. The excess of the purchase price over the fair value of the net assets is recognized as Goodwill on the acquirer's balance sheet.

Goodwill Is Recognized Only When the Purchase Price of a Company