In Reference to International Accounting for Goodwill,U

question 16

Multiple Choice

In reference to international accounting for goodwill,U.S.companies have complained that past U.S.accounting rules for goodwill placed them at a disadvantage in competing against foreign companies for merger partners.Why?

• A)Previous rules required immediate write off of goodwill which resulted in a one-time expense that was not required under international rules.
• B)Previous rules required amortization of goodwill which resulted in an ongoing expense that was not required under international rules.
• C)Previous rules did not permit the recording of goodwill,thus resulting in a lower asset base than international counterparts would recognize.
• D)Previous rules required the immediate write of goodwill to stockholder's equity.

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Definitions:

Units

Generally refers to the quantitative measure of output or production in business operations.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products based on a certain activity base, such as labor hours or machine hours.

Activity-based Costing

A costing methodology that assigns overhead and indirect costs to specific activities, thereby providing more accurate product costing.

Traditional Cost System

A cost accounting system that assigns costs to products based on direct labor hours, direct materials, and manufacturing overhead, without differentiating between variable and fixed costs.