Question

Which of the following is not true about goodwill ?

a. goodwill must be written off over 5 years.
b. goodwill must be checked for impairment at least annually.
c. the loss of key customers could impair the value of goodwill.
d. goodwill is shown as an asset on the balance sheet.

Answer 1

Goodwill is not required to be written off over 5 years but must be tested for impairment at least annually. It manifests as an intangible asset on the balance sheet and can get impaired by events like losing key customers. Therefore correct option is A

Step-by-step explanation:

The statement that is not true about goodwill is a. goodwill must be written off over 5 years. According to current accounting standards, goodwill is not amortized over a specific period but must be tested for impairment at least annually. Goodwill can be impaired by events such as the loss of key customers, which can diminish the future economic benefits expected from the acquisition that created the goodwill. Lastly, goodwill is indeed shown as an intangible asset on the balance sheet of a company.