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

question 19

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 earned revenue or whether it generates mostly contribution and investment revenue in the future.
• C) Whether the acquired not-for-profit entity has the ability to generate significant amounts of both earned revenues and 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 the above. Goodwill can only be recognized in an acquisition of a for-profit entity.

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time.

Bond

A fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.

American Options

A type of options contract that allows the holder to exercise it at any time before the expiration date.

Call Option

A financial contract giving the buyer the right, but not the obligation, to purchase a stock, bond, or other instrument at a specified price within a specific time period.