Consolidated Financial StatementsMCQQuestion 5715 of 6
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Which of the following methods is used to account for goodwill in consolidated financial statements?

Options

AGoodwill is amortized over its useful life
BGoodwill is written off immediately against reserves
CGoodwill is capitalized and shown as a separate asset
DAll of the above
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Correct Answer

✅ Option A — Goodwill is amortized over its useful life

All Options:

  • AGoodwill is amortized over its useful life ✓
  • BGoodwill is written off immediately against reserves
  • CGoodwill is capitalized and shown as a separate asset
  • DAll of the above

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Detailed Solution & Explanation

In consolidated financial statements, goodwill is accounted for by amortizing it over its useful life. This is in accordance with the accounting standards, which require that goodwill be amortized over a period not exceeding five years.
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Key Concepts to Understand

Goodwill

An intangible asset representing the good reputation, brand name, customer loyalty, and earning capacity of a business over and above its net tangible assets. It arises in accounting during partnership changes or business acquisitions.

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