Goodwill

CFA Level I FRA
#1

Am I correct in assuming goodwill can only be capitalized if a company has made an aquisition?

And if so, would the goodwill be on the balance sheet forever (assuming impairment = 0)

I’m a tad bit confused…

#2

Yes, goodwill arises upon an acquistion. A company cannot create goodwill itself.

Yes, goodwill remains on the balance sheet unless it is written down as a result of impairment (under IFRS and US GAAP). However, under some local GAAPs which are not tested in the CFA exam, goodwill is actually amortised.

regards

#3

Wojtek is right.

And don’t worry. you will get a healthy dose of goodwill at level 2.

#4

Thanks very much guys!