Goodwill recognized in a business combination must be allocated across a firm’s identified reporting units. For...
Goodwill recognized in a business combination must be allocated across a firm’s identified reporting units. For a consolidated entity with multiple reporting units, when is goodwill considered to be impaired?
Multiple Choice
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When the sum of the fair values of all reporting units within a business combination exceeds the sum of their respective carrying amounts
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When the sum of the carrying amounts of all reporting units within a business combination exceeds the sum of their respective fair values
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When any individual reporting unit's fair value exceeds its carrying amount
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When any individual reporting unit's carrying amount exceeds its fair value
Homework Answers
Under US GAAP
Goodwill impairment is done at the individual reporting unit level.
Testing for impairment under US GAAP involves comparing the fair value of the reporting unit to its carrying amount.
Accordingly Goodwill is considered for impairment when carrying amount exceeds fair value.
Impairment loss is the excess of carrying amount over the fair value .
This loss is first allocated to the goodwill and then other assets in pro rota ratio.
Option D is the right answer
As per IFRS
This treatment is different from US GAAP, treatment as per IFRS involves testing for impairment at sum of fair value of reporting units and Their carrying amounts .They are assessed on a group basis.
As per IFRS OPTION B is correct
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Goodwill recognized in a business combination must be allocated
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Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In...
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review for each of its reporting units. In its qualitative
assessment, one particular reporting unit, Sellers, emerged as a
candidate for possible goodwill impairment. Sellers had recognized
net assets with carrying amounts totaling $1,192, including
goodwill of $705. Seller’s reporting unit fair value is assessed at
$1,184 and includes two internally developed unrecognized
intangible assets (a patent and a customer list with fair values of
$272 and $112, respectively). The following table...
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