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    Question

    Which of the following statements about consolidated

    goodwill is true?
    A Goodwill is amortised every year as per an arbitrary schedule Correct Answer Incorrect Answer
    B Goodwill is recognised when purchase consideration > fair value of identifiable net assets; subsequently tested for impairment Correct Answer Incorrect Answer
    C Goodwill equals subsidiary's retained earnings only Correct Answer Incorrect Answer
    D Negative goodwill is always recorded as capital reserve only Correct Answer Incorrect Answer

    Solution

    Goodwill arising on consolidation is the excess of the consideration transferred over the acquirer's interest in the fair value of the identifiable net assets acquired. It is not amortized but is tested for impairment annually.

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