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Chapter 5 — Measurement of Goodwill or Gain From a Bargain Purchase, and Consideration Transferred in a Business Combination

5.1 Measuring Goodwill

5.1 Measuring Goodwill

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.” Because goodwill is not a separately identifiable asset, it cannot be measured directly. It is therefore measured as a residual and calculated as the excess of the sum of (1) the consideration transferred, (2) the fair value of any noncontrolling interest in the acquiree, and (3) the fair value of the acquirer’s previously held equity interest in the acquiree over the net of the acquisition-date values of the identifiable assets acquired and the liabilities assumed.