Under what circumstances is it appropriate to record goodwil

Under what circumstances is it appropriate to record goodwill?

Solution

From the accounting perspective, business goodwill is generally recorded only if it is acquired as part of a business or professional practice purchase. The typical way the accountants handle business goodwill then is by subtracting the fair market value of the business tangible assets from the total business value.

Other wise we can say that Goodwill is recorded only when an entire business is purchased. Companies that recognize goodwill in a business combination consider it to have an indefinite life and therefore should not amortize it.