<P> Goodwill is no longer amortized under U.S. GAAP (FAS 142). FAS 142 was issued in June 2001 . Companies objected to the removal of the option to use pooling - of - interests, so amortization was removed by Financial Accounting Standards Board as a concession . As of 2005 - 01 - 01, it is also forbidden under International Financial Reporting Standards . Goodwill can now only be impaired under these GAAP standards . </P> <P> Instead of deducting the value of goodwill annually over a period of maximal 40 years, companies are now required to determine the fair value of the reporting units, using present value of future cash flow, and compare it to their carrying value (book value of assets plus goodwill minus liabilities .) If the fair value is less than carrying value (impaired), the goodwill value needs to be reduced so the carrying value is equal to the fair value . The impairment loss is reported as a separate line item on the income statement, and new adjusted value of goodwill is reported in the balance sheet . </P> <P> When the business is threatened with insolvency, investors will often deduct the goodwill from any calculation of residual equity because it will likely have no resale value . </P>

Where does goodwill go on the income statement