Goodwill Impairment Essay

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Case 1 Goodwill Impairment Testing

Should management have performed an interim goodwill impairment test as of September 30, 2010?
Galaxy Sports Inc. (Galaxy) is a U.S. based manufacturer of sports equipment. It is an SEC registrant with one operating segment with three separate reporting units: fitness, golf and hockey. The fitness is the largest division of Galaxy with allocated goodwill of $200 million. The golf division reports $130 million of goodwill and the hockey has $30 million of goodwill. Each division has been a reporting unit for a number of years. Due to the complexities involved with the calculation of goodwill and resource restraints in 2009, Galaxy decided to hire Big Time LLC (Big Time) to perform three annual ASC
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An example is a recent significant acquisition or a reorganization of an entity’s segment reporting structure that might significantly change the composition of a reporting unit, b) the most recent fair value determination resulted in an amount that exceeded the carrying amount of the reporting unit by a substantial margin, and c) based on an analysis of events that have occurred and circumstances that have changed since the most recent fair value determination, the likelihood that a current fair value determination would be less than the current carrying amount of the reporting unit is remote.
In 2008, Harris Interactive performed an interim test based on the following reasoning: * operating losses in its reporting unit for the fiscal quarters ended September 30, 2008 and December 31, 2008 * potential declines in market research spending for calendar year 2009 based on industry analyst forecasts * headcount reductions and related charges as announced in October and December 2008, the details of which are described in Note 4, “Restructuring and Other Charges” to these unaudited consolidated financial statements, and a 62% decline in the Company’s per share stock
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