Module V· Purchase Accounting & Goodwill — BasicsIntermediate
Question
Write the goodwill formula in a 100% stock deal, and explain why existing target goodwill is subtracted.
Answer
Goodwill equals consideration minus fair value of identifiable net assets. Existing target goodwill is eliminated because acquisition accounting creates new goodwill from the buyer's transaction price.
Deep diveShow more details
In PPA, identifiable intangible assets are recognized separately first; goodwill is the residual plug.