Advanced Accounting
14th Edition
ISBN: 9781260247824
Author: Joe Ben Hoyle, Thomas F. Schaefer, Timothy S. Doupnik
Publisher: RENT MCG
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Goodwill recognized in a business combination must be allocated among a firm’s identified reporting units. If the fair value of a particular reporting unit with recognized goodwill falls below its carrying amount, which of the following is true?
No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount.
A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value.
A goodwill impairment loss is recognized for the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.
The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair value
Which of the following statements is true about goodwill?
Goodwill may be recorded when the fair value of a company's assets exceeds their
а.
cost.
b. Goodwill may be recorded when one company acquires another in a business
combination.
С.
Goodwill may be recorded when a company has exceptional customer relations.
d. Goodwill may be recorded when it is identified within a company.
Which of the following statements is true about goodwill?
O a. Goodwill may be recorded when it is identified within a
company.
O b. Goodwill may be recorded when a company has
exceptional customer relations.
O c. Goodwill may be recorded when the fair value of a
company's assets exceeds their cost.
O d. Goodwill may be recorded when one company acquires
another in a business combination.
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- Choose the correct.Goodwill recognized in a business combination must be allocated among a firm’s identified reporting units. If the fair value of a particular reporting unit with recognized goodwill falls below its carrying amount, which of the following is true?a. No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount.b. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value.c. A goodwill impairment loss is recognized for the excess of a reporting unit’s carrying amount over its fair value, not to exceed the carrying amount of goodwill.d. The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair value.arrow_forwardIn a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under PFRS 3 Business Combinations, the acquirer should A. recognize the excess immediately in profit or los B. recognize the excess immediately in other comprehensive income C. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income D. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or lossarrow_forwardIn a business combination, an acquirer's interest in the fair value of the net assetsacquired exceeds the consideration transferred in the combination. Under PFRS3 Business Combinations, the acquirer should A. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in othercomprehensive income B. recognize the excess immediately in other comprehensive income C. recognize the excess immediately in profit or loss D. reassess the recognition and measurement of the net assets acquired and theconsideration transferred, then recognize any excess immediately in profit or lossarrow_forward
- In a business combination, an acquirer's interest in the fair value of the net assets acquired exceeds the consideration transferred in the combination. Under IFRS 3 Business Combinations, the acquirer should a. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in profit or loss b. recognize the excess immediately in other comprehensive income c. reassess the recognition and measurement of the net assets acquired and the consideration transferred, then recognize any excess immediately in other comprehensive income d. recognize the excess immediately in profit or lossarrow_forwardIn paragraph 44 of Statement of Financial Accounting Standards No. 141, “Business Combinations,” the Financial Accounting Standards Board directed that if the sum of the fair values of assets acquired and liabilities assumed in a business combination exceeds the cost of the acquired enterprise, such excess should be allocated as a pro rata reduction of amounts that otherwise would have been assigned to noncurrent assets other than specified exceptions.Instructions What support, if any, do you find for the action of the FASB? Explain.arrow_forwardIdentify which one of the following is falling under the meaning of goodwill? a. The present value of firm's anticipated excess earnings b. The share of profit eligible to each partner c. The future value of firm's present earnings d. The past profits of the firmarrow_forward
- When should a consolidated entity recognize a goodwill impairment loss? If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying amounts. Whenever the entity’s fair value declines significantly. If the fair value of a reporting unit with goodwill fall below its carrying amount. Annually on a systematic and rational basis.arrow_forwardThis distinguishes a business combination from other types of investment transactions. Obtaining of control Acquisition of stocks Acquisition of assets All of these The entity that obtains control over another business in a business combination called the Controller Acquiree Acquirer Controllee Entity A obtained control of Entity B in a business combination. When computing for goodwill, Entity A would least likely account for which of the following? Entity B’s research and development projects that were already charged as expenses, but have a fair value as at the acquisition date. Entity B’s unrecorded identifiable intangible assets Operating lease between Entity A and Entity B, wherein Entity B is the lessee. Entity A’s expected costs of exiting or terminating some or all of Entity B’s activities after the combination. A contingent liability assumed in a business combination Is not accounted for by the acquirer if the contingent liability has an improbable outflow of economic…arrow_forwardThe identifiable assets acquired and liabilities assumed in a business combination are generally measured at: a. Acquisition-date fair values b. Previous carrying amounts c. Fair value less cost to sell d. Costarrow_forward
- Choose the correct. When should a consolidated entity recognize a goodwill impairment loss?a. If both the fair value of a reporting unit and its associated implied goodwill fall below their respective carrying amounts.b. Whenever the entity’s fair value declines significantly.c. If the fair value of a reporting unit with goodwill fall below its carrying amount.d. Annually on a systematic and rational basis.arrow_forwardWhich of the following accounting treatments for costs related to business combination is incorrect? Group of answer choices a. Acquisition related costs such as finder’s fees; advisory, legal, accounting, valuation and other professional and consulting fees; and general administrative costs, including the costs of maintain an internal acquisitions department shall be recognized as expense in the Profit/Loss in the periods in which the costs are incurred. b. The costs related to issuance of financial liability at fair value through profit or loss shall be recognized as expense while those related to issuance of financial liability at amortized cost shall be recognized as deduction from the book value of financial liability or treated as discount on financial liability to be amortized using effective interest method. c. The costs related to the organization of the newly formed corporation also known as pre-incorporation costs shall be capitalized as goodwill or deduction from…arrow_forwardNegative Goodwill is based on the accounting concept of Goodwill, an intangible asset that represents the worth of a company's brand name, patents and other intellectual19property, customer base, licenses, and other items that are difficult to put an amount on but help to make a company valuable. When the price paid is less than the actual value of the company's net tangible assets, negative Goodwill results.Required: In accordance with IFRS 3: Business Combinations, Identify THREE (3) factors that account for a negative Goodwill and indicate its accounting treatment when it occurs in the preparation of consolidated financial statements.arrow_forward
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