What is goodwill and how is it classified in terms of the accounting equation?
When one firm acquires another firm, it measures the identifiable assets acquired
and liabilities assumed at their current fair values. If the purchase price exceeds the sum of
the fair values of the identifiable assets less the identifiable liabilities, the excess is goodwill.
Goodwill is an asset that includes intangibles that the acquiring firm cannot separately identify,
such as customer loyalty. These desirable attributes cause the buyer to pay more for the
acquired firm than the sum of the fair values of all the other assets, less liabilities, identified in
the acquisition
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