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Labs
What did the buyer pay for?
A purchase price is allocated, not guessed.
Live experiment
What did the buyer pay for?
Goodwill100
Before you move a sliderDoes a higher fair value for the identifiable assets raise or lower goodwill?
Goodwill = price 300 − (assets 280 − liabilities 80) = 100
Read the mechanism
Goodwill is what is left after every identifiable asset and liability has been measured. A later impairment reduces goodwill and profit without any new cash leaving the business. The tax deduction, if any, follows its own rules.
Model assumptions and units
Made-up $m. A simple 100% acquisition with no noncontrolling interest, prior stake or deferred tax. The later impairment uses a simplified US GAAP reporting-unit comparison, limited to the goodwill balance. A bargain result has to be remeasured before any gain is recognized.