Which of the following is true about public companies regarding goodwill under US GAAP?

Under US GAAP, public companies cannot amortize goodwill. Instead of periodic amortization, goodwill is subject to annual impairment testing. This means that at least once a year, a company must evaluate whether the carrying value of goodwill exceeds its fair value. If it does, the company must recognize an impairment loss, which reduces the value of goodwill on the balance sheet.

This approach reflects the idea that goodwill, which arises from acquiring a business at a premium over its identifiable net assets, is expected to provide future economic benefits indefinitely rather than diminishing in value systematically over time as would be the case with amortization.