Goodwill

 

Net Assets =  Total Assets – Total Liabilities

 Goodwill = Acquisition price – FMV Net Assets 

 

Net Assets =  $ 400,000 – $200,000 = $200,000

 Goodwill =  $400,000 – $200,000 = $200,000

 

Goodwill

Must capitalize as an asset.

Cannot amortize to earnings.

Must periodically (at least annually) assess for impairment.

If impaired, must write it down—charge to earnings.