Question

Goodwill Impairment Test-Prior to Adoption of FASB ASU 2017-04 L04 Assume the equity method Equity Investment account relating to a subsidiary has a reported balance of $5,020,000, including $480,000 of Goodwill. The fair value of the subsidiary is $4,500,000. The fair
value of the subsidiary's individually identifiable net assets is $4,300,000. The subsidiary has only one reporting unit, which is the same as the overall entity.

1. Describe when companies are required to conduct a quantitative goodwill impairment test.

2. For this fact set, determine whether Goodwill is impaired and, if so, the amount of impairment

   assuming the parent company has not yet adopted FASB ASU 2017-04.

3. Prepare the required journal entry if you determine Goodwill is impaired.

Answer 1

Reported Balance - 50,20,000

Less: Good will ---- 4,80,000

Net Investment -- 45,40,000

Fair value of the cmpany is 45,00,000 (Highest of Fair value of Business as combined or seperate asset wise)

Impairment - 40,000

Above amount is to be recorded as impairment

Journal entry for above impairment is

Impairtment A/c Dr - 40,000

To Investment A/c 40,000