ABV Goodwill & Intangible Asset Valuation

Question 1

Under ASC 805, which of the following best describes 'goodwill' in a business combination?

Accepted Answer

The excess of the acquisition price over the fair value of identifiable net assets acquired

Answer

Under ASC 805, goodwill is the excess of consideration transferred over the fair value of identifiable net assets (assets minus liabilities) acquired in a business combination.

Question 2

The Multi-Period Excess Earnings Method (MPEEM) is most commonly used to value which type of intangible asset?

Accepted Answer

Customer relationships and developed technology

Answer

MPEEM is most commonly applied to primary intangible assets such as customer relationships and developed technology, isolating their contributory asset charges to derive residual earnings.

Question 3

Which relief-from-royalty method assumption is most critical when valuing a trade name?

Accepted Answer

The appropriate royalty rate that a willing licensor and licensee would negotiate

Answer

The relief-from-royalty method derives value by estimating the royalties saved because the company owns, rather than licenses, the trade name; the royalty rate selection is therefore the most critical assumption.

Question 4

Which of the following is NOT a recognized category of intangible assets under ASC 805?

Accepted Answer

Entity-related goodwill

Answer

ASC 805 categorizes intangibles as marketing-related, customer-related, artistic-related, contract-based, and technology-based; 'entity-related goodwill' is not a separate category — goodwill is residual, not a classified intangible.

Question 5

Contributory asset charges (CACs) in the MPEEM represent:

Accepted Answer

Returns on and of all supporting assets used to generate the earnings attributable to the subject intangible

Answer

CACs represent the required returns on (and, for wasting assets, of) all other assets that contribute to generating the cash flows from which the subject intangible's value is isolated.

ABV - Accredited in Business Valuation Practice Test

ABV - Accredited in Business Valuation Practice Test

ABV Goodwill & Intangible Asset Valuation