What is the treatment for internally generated goodwill?

The treatment for internally generated goodwill is that it is not capitalized unless it is purchased as part of a business combination. This approach is based on the conceptual framework of accounting, which requires that an asset must have a reliable measurement basis and must provide future economic benefits to be recognized on the balance sheet. Internally generated goodwill lacks the ability to meet these criteria because it is difficult to measure and does not represent a specific identifiable asset.

In practice, internally generated goodwill arises from factors such as the company's reputation, customer relationships, or brand value, but these components do not have a directly attributable cost that can be reliably measured. As such, they are not recognized as intangible assets under the accounting standards.

In contrast, goodwill that is acquired through a business acquisition is capitalized as it results from a transaction that can be reliably measured. This makes option C consistent with the International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP).