Asked by Chloe Cluchey on May 26, 2024
Verified
Goodwill is measured as the difference between the:
A) cost of the assets given up, and the cost of the net assets acquired.
B) cost of the net assets acquired, and the net present value of the consideration given up.
C) present value of the consideration transferred, and the present value of the net assets acquired
D) fair value of the consideration transferred, and the fair value of the assets and liabilities acquired.
Goodwill
The intangible asset that arises when a company acquires another business for more than the fair value of its separable net assets.
Fair Value
The expected selling price for an asset or the amount needed to cover a liability, facilitated through a systematic deal between market participants on the specific date of measurement.
- Comprehend the idea and financial handling of goodwill during business consolidations.
Verified Answer
IA
Isaac AjeletiMay 30, 2024
Final Answer :
D
Explanation :
Goodwill is measured as the excess of the fair value of consideration transferred over the fair value of the assets and liabilities acquired. This is because goodwill represents the value of the business that cannot be attributed to identifiable assets and liabilities. Option A is incorrect as it compares cost, not fair value. Option B is incorrect because net present value is not relevant in measuring goodwill. Option C is also incorrect because it compares present values, not fair values.
Learning Objectives
- Comprehend the idea and financial handling of goodwill during business consolidations.
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