[Verse 1] When companies buy other firms today They often pay much more than book value's way The difference between what's paid and what's on books Creates an asset that's worth a second look It's goodwill on the balance sheet appearing Brand value, customer lists endearing Synergies and market power combined An intangible asset of the purchased kind [Chorus] Goodwill must be tested every single year Check if value's fallen, make the picture clear Two-step test or single-step will do Fair value versus carrying value too No amortization, just impairment loss When goodwill's worth less, it's written off [Verse 2] First assign goodwill to reporting units Business segments where the cash accrues Then compare the fair value to the book If fair's below, take a closer look Calculate impairment as the difference Between what's carried and what makes sense Write it down upon the income sheet Goodwill losses make earnings incomplete [Chorus] Goodwill must be tested every single year Check if value's fallen, make the picture clear Two-step test or single-step will do Fair value versus carrying value too No amortization, just impairment loss When goodwill's worth less, it's written off [Bridge] Unlike other assets that decline each year Goodwill stays constant unless problems appear But once it's written down it can't come back Impairment losses stay upon the track Management judgment plays a crucial role In testing timing and the fair value goal Investors watch for any signs of strain When goodwill's questioned, stock might feel the pain [Chorus] Goodwill must be tested every single year Check if value's fallen, make the picture clear Two-step test or single-step will do Fair value versus carrying value too No amortization, just impairment loss When goodwill's worth less, it's written off [Outro] From acquisition price to balance sheet Goodwill's journey is now complete Test it yearly, write down what's gone Goodwill accounting, now you know the song
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