When an Acquisition Occurs in Not-For-Profit Accounting, Recognition of Goodwill

question 43

Multiple Choice

When an acquisition occurs in not-for-profit accounting, recognition of goodwill depends on:

• A) Whether control has been achieved by the acquiring not-for-profit entity.
• B) Whether the acquired not-for-profit entity has the ability to generate significant amounts of revenue from providing goods or services or from membership fees, or whether it is expected to generate primarily contribution and investment revenue in the future.
• C) Whether the acquired not-for-profit entity has the ability to generate significant amounts of revenues from goods or services or membership fees, as well as significant amounts of contribution revenues in the future.
• D) Whether the acquired not-for-profit entity has a history of generating significant revenues of any type.
• E) None of these answer choices are correct. Goodwill can only be recognized in an acquisition of a for-profit entity.

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Definitions:

Foreign Aid

Financial, technical, or material support given by one country to another, often for development projects, humanitarian aid, or to foster diplomatic relationships.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given period, a primary indicator of an economy's health.

Federal Government

The national government of a federal system, possessing powers enumerated by its constitution.

Social Security Taxes

Social Security taxes are taxes levied on both employers and employees to fund the Social Security program, providing benefits for retirees, disabled persons, and survivors.