Negative Goodwill

An approach to measuring goodwill in a business combination where the acquirer recognises goodwill only in proportion to its ownership interest, rather than attributing goodwill to the non-controlling interest. Under IFRS 3, acquirers have a choice on a transaction-by-transaction basis to measure non-controlling interests either at fair value (full goodwill) or at the NCI's proportionate share of identifiable net assets (partial goodwill).

An approach to measuring goodwill in a business combination where goodwill is recognised for both the acquirer's share and the non-controlling interest's share, resulting in a higher total goodwill figure. Under ASC 805, the full goodwill method is mandatory for all business combinations.

An intangible asset that arises when a company is acquired for more than the fair value of its net identifiable assets. Goodwill reflects factors such as brand value, customer loyalty, workforce expertise, and synergies that are expected to generate future economic benefits.

The mandatory annual assessment (and more frequent assessment when indicators exist) of whether the carrying amount of goodwill exceeds its recoverable amount. Under IAS 36, goodwill is tested at the cash generating unit level by comparing the unit's carrying amount (including allocated goodwill) with its recoverable amount.

A business combination in which the fair value of the identifiable net assets acquired exceeds the consideration transferred, resulting in a gain rather than goodwill. Under IFRS 3 and ASC 805, the acquirer must reassess whether all assets and liabilities have been correctly identified and measured before recognising a bargain purchase gain in profit or loss.

The US GAAP standard governing the subsequent measurement of goodwill and other intangible assets after initial recognition in a business combination. ASC 350 requires annual impairment testing of goodwill and indefinite-lived intangible assets, permits an optional qualitative assessment before performing the quantitative impairment test, and provides guidance on the amortisation of finite-lived intangible assets.

The required accounting method for business combinations under IFRS 3 and ASC 805, which involves identifying the acquirer, determining the acquisition date, recognising and measuring the identifiable assets acquired and liabilities assumed at fair value, and recognising goodwill or a gain from a bargain purchase. The acquisition method replaced the previously permitted pooling of interests method and ensures that all identifiable intangible assets are separately recognised at fair value on the acquirer's balance sheet.

A non-cash charge recorded when the carrying value of goodwill on the balance sheet exceeds its estimated recoverable amount. Goodwill impairment testing, required annually under IFRS and US GAAP, often signals that the intangible value anticipated at the time of acquisition — including synergies, customer relationships, and growth potential — has not been realised.