With Respect to the Recognition of Goodwill in a Business

question 118

Multiple Choice

With respect to the recognition of goodwill in a business combination, which of the following statements is true?

• A) Only US GAAP requires recognition of goodwill when the fair value of the consideration transferred exceeds the net fair value of assets and liabilities.
• B) US GAAP standards require goodwill to be allocated to reporting units expected to benefit from the goodwill.
• C) Only IFRS standards require annual assessments for goodwill impairment.
• D) IFRS requires a reporting unit's implied fair value for goodwill to be calculated as the excess of such unit's fair value over the fair value of its identifiable net assets.
• E) Neither US GAAP, nor IFRS, provide that goodwill impairments will not be recoverable once recognized.

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Definitions:

Production Possibilities Frontier

A curve demonstrating the maximum achievable output levels for two or more goods, given a set of inputs and technology.

Opportunity Cost

The avoiding of potential profits from alternative choices by settling on one.

Prairie Dog

A small burrowing rodent found in the grasslands of North America, known for its complex social structures and communication methods.

Available Grassland

Land areas covered with grass that are accessible and suitable for grazing animals or potentially for cultivation and other uses.