GAAP accounting
Under GAAP (“book”) accounting, goodwill is not amortized but rather tested annually for impairment regardless of whether the acquisition is an asset/338 or stock sale.
Why should we amortize goodwill?
Amortization would reduce some pressure from the impairment test and potentially simplify its execution. Such a systematic reduction of the carrying amount of acquired goodwill would also address concerns of those stakeholders who believe that it tends to be overstated.
Why is goodwill not amortized?
Under US GAAP and IFRS, goodwill is never amortized, because it is considered to have an indefinite useful life. Instead, management is responsible for valuing goodwill every year and to determine if an impairment is required.
