Question: Kallus Corp. is an industry leader in the manufacture of toys. Each year, its design staff comes up with new ideas that are a great success. As a result, Kallus sales and profits consistently exceed those of other toy manufacturers. Over the past ten years, Kallus has earned average net profits of $189 million compared to $122 million for the typical company in the toy industry.
Answer (briefly) the following questions:
a. Does Kallus have goodwill? Explain.
b. Is goodwill an asset? Explain. (Does it meet the definition of an asset found in SFAC No. 6?)
c. If you believe Kallus has goodwill, how would you go about measuring it? Explain.
d. Should Kallus Corp. report goodwill in the balance sheet? Why or why not?