Accounting considerations – Getting your arms around goodwill

Description

Abstract: Goodwill — also known as “blue sky” — is an intangible asset, a commodity that isn’t easily quantified. Goodwill typically appears on a balance sheet following a merger or acquisition when one company acquires another company for a price higher than the fair value of its assets. With so many dealers consolidating their businesses over the last year, now is a good time to revisit the nature and accounting treatment of goodwill. This article describes that treatment and notes that dealerships today are able to spend less time and money on goodwill testing than in past years, because of accounting changes introduced in 2014.