When a premium is paid above the fair value of the net assets acquired over a subsidiary, it results in .........
1 answer
When a premium is paid above the fair value of the net assets acquired over a subsidiary, it results in **goodwill**. Goodwill is an intangible asset that arises when one company acquires another for a price higher than the fair market value of the net identifiable assets (i.e., assets minus liabilities) of the acquired company. This excess payment typically reflects the acquiring company's valuation of various factors such as synergies, brand reputation, potential for future earnings, and other intangible benefits expected from the acquisition. Goodwill is recorded on the balance sheet of the acquiring company and periodically tested for impairment.