Internally generated goodwill:
A) is not recognised because it does not provide future economic benefits
B) is not recognised because of the difficulty of valuing it reliably
C) is recognised because it provides a future economic benefit
D) A and B are incorrect

Question

Quizplus · Accepted Answer

Internally generated goodwill is not recognised because of the difficulty of valuing it reliably. This is because goodwill arises out of factors such as reputation, customer relations, and employee skills, which can be difficult to measure objectively. Therefore, accounting standards require that only goodwill acquired in a business combination be recognised in financial statements, because the fair value of the acquired business can be measured more reliably.

Internally Generated Goodwill