Question of the Week – Financial Reporting – Goodwill

Spoiler alert! The correct answer is B.

Goodwill is calculated as the difference between purchase price and fair value of the business being purchased. In this case, goodwill = $800 million – ($1.8 billion – $1.2 billion) = $200 million. Amortization of Goodwill is not required whether under U.S. GAAP or IFRS, but is rather subject to an annual impairment test.