Is Goodwill Capitalized or Expensed?
Goodwill is generally recognized as a capitalized unidentifiable intangible asset on a company’s balance sheet from the acquisition of another companies net identifiable assets. However, after the purchase of a company’s net identifiable intangible assets, they may expend resources to continuously maintain it. The CPA Exam will refer to this situation as “internally developed” goodwill.
So How do We Calculate Goodwill?
Upon acquiring another company’s net identifiable assets, goodwill is calculated as the difference between the purchase price of the company and the fair market value of its net identifiable assets.
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