Lesson: Goodwill from Business Combinations

In this lesson, Nick Palazzolo, CPA, breaks down the nuances of goodwill in the context of business combinations. He unpacks what constitutes goodwill, detailing how it represents the excess of an entity's purchase price over its fair market value at the date of acquisition. By distinguishing between the treatment under the acquisition method and equity method, Nick ensures clarity regarding the scenarios in which goodwill can arise. Furthermore, he clarifies that costs to maintain or develop goodwill cannot be capitalized and that internally generated goodwill doesn't make it to the balance sheet—it's exclusively a byproduct of acquisitions where a company is purchased for more than its fair market value.