Deloitte
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Chapter 1 — Overview and Scope

1.1 Overview

1.1 Overview

The ASC master glossary defines goodwill as “[a]n asset representing the future economic benefits arising from other assets acquired in a business combination or an acquisition by a not-for-profit entity that are not individually identified and separately recognized.”1 Because goodwill is not a separately identifiable asset, it cannot be measured directly. It is therefore measured as a residual. Goodwill is initially recognized on an entity’s balance sheet in the following ways:
  • In a business combination in accordance with ASC 805, the excess of the consideration transferred over the acquisition-date values of assets acquired and liabilities assumed is recognized as goodwill. (See Chapter 5 of Deloitte’s Roadmap Business Combinations for more information about measuring goodwill in a business combination.)
  • Once an entity adopts ASU 2023-05, upon the formation of a joint venture in accordance with ASC 805-60, the excess of the fair value of the joint venture over its identifiable assets and liabilities is recognized as goodwill.
  • Upon adoption of fresh-start reporting in accordance with ASC 852, the excess reorganization value recognized by entities is reported as, and accounted for in the same manner as, goodwill.
  • In an acquisition by an NFP in accordance with ASC 958-805 in which the operations of the acquiree as part of the combined entity are not expected to be predominantly supported by contributions and returns on investments.

Footnotes

1
Upon adoption of ASU 2023-05, the definition of goodwill will become:
An asset representing the future economic benefits arising from other assets acquired in a business combination, acquired in an acquisition by a not-for-profit entity, or recognized by a joint venture upon formation that are not individually identified and separately recognized.