The Treatment of Internally Generated Goodwill Varies from Purchased Goodwill

question 39

Multiple Choice

The treatment of internally generated goodwill varies from purchased goodwill under AASB 138 in that:

• A) Purchased goodwill is not amortised whereas internally generated goodwill is assumed to be maintained indefinitely.
• B) Purchased goodwill may be recorded as an asset, whereas internally generated goodwill may not.
• C) Internally generated goodwill is to be amortised over a period of no greater than 20 years, whereas purchased goodwill may not be recorded.
• D) Purchased goodwill is to be expensed in the period it is bought whereas internally generated goodwill is to be deferred and amortised over a period of no less than 20 years.

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Definitions:

Socially Efficient

A condition where resources are allocated in a way that benefits society as a whole and maximizes overall welfare.

Marginal Cost

Marginal cost is the change in total cost that arises when the quantity produced is increased by one unit; it is the cost of producing one additional unit of a product.

Quantity Of Output

The total amount of goods or services produced by a firm or economy within a specific period.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium is not achieved due to market failures or interventions.