What is the difference between goodwill and intangible assets?
Short Answer
Goodwill is the residual value paid above the fair value of all identifiable net assets in an acquisition. Intangible assets are specific, identifiable non-physical assets like brands, patents, and customer relationships.
Full Explanation
In M&A accounting, the purchase price is first allocated to identifiable tangible and intangible assets at fair value. Any remaining amount is recorded as goodwill. Identifiable intangible assets must meet the separability criterion (they can be sold, licensed, or transferred independently) or the contractual-legal criterion (they arise from contractual or legal rights). Common identifiable intangibles include customer relationships, brand names, patented technology, and software. Goodwill, by contrast, represents synergies, assembled workforce value, and going-concern value that cannot be separately identified. Under IFRS, goodwill is not amortised but is tested annually for impairment. Under US GAAP (post-ASU 2017-04), goodwill impairment is measured as the excess of carrying amount over fair value. Understanding this distinction is crucial for purchase price allocation, tax planning, and ongoing financial reporting.
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