A) Explanation The amortization of goodwill rules has been amended by the FASB over time. At first, for the purpose of the financial reporting the goodwill was necessary to amortized over time. However, at the when the FASB decided to remove the pooling of interests method in contradiction of will of various corporations, and it is also decided to eliminate the goodwill amortization in support of goodwill impairment test. In the mean time, it is uncertain that whether the goodwill carries a measurable useful life or it is a scraping asset, however, it is reported as an asset with indeterminate life and not currently amortized. In ASU 2011-08 FASB disclosures that the testing for goodwill impairment. The amendment in the update authorize an organization to first evaluate qualitative features to measure whether it is much probable then not that fair value of reporting unit is below its carrying amount as a foundation for measuring whether it is mandatory to carry out the two step goodwill impairment test as illustrated in the Topic 350. The more-likely-than-not threshold is defined as having a possibility of more than 50 percent. Former guidance under Topic 350 needed an organization to test goodwill for impairment, on at least an annual basis, by matching the fair value of a reporting unit with its carrying amount, comprising goodwill (step one). In case, the fair value of a reporting unit is lower than its carrying amount, then the second step of the test should be executed to measure the amount of the impairment loss if any. As per the amendments in this Update, an organization is not needed to compute the fair value of a reporting unit except the organization defines that it is more likely than not that it’s fair value is below its carrying amount... B) To determine Explain the possible reasons why the company might have used its discretion either or delay or to expedite the recording of the impairment of goodwill for the Company B reporting unit. Explain the effect did the impairment have on earnings for the years 2008 and 2009 and effect on ROA for the future years. C) To determine Explain the manner that the stock market to respond to the news of the goodwill impairment. Explain the reasons.

7th Edition

ISBN: 9781119626480

Author: JETER

Publisher: WILEY

See similar textbooks

Question

Chapter 5, Problem 2AFS

To determine

Describe the current FASB position on goodwill impairment and whether it is a better or poorer way of addressing changes in goodwill valuation over time than amortization. Explain the reasons.

To determine

Explain the possible reasons why the company might have used its discretion either or delay or to expedite the recording of the impairment of goodwill for the Company B reporting unit. Explain the effect did the impairment have on earnings for the years 2008 and 2009 and effect on ROA for the future years.

To determine

Explain the manner that the stock market to respond to the news of the goodwill impairment. Explain the reasons.

Expert Solution & Answer

Chapter 5 Solutions

*ADVANCED ACCOUNTING

Ch. 5 - Prob. 1Q Ch. 5 - In what account is the difference between book...Ch. 5 - Prob. 3Q Ch. 5 - Prob. 4Q Ch. 5 - Prob. 5Q Ch. 5 - Prob. 6Q Ch. 5 - Prob. 7Q Ch. 5 - Prob. 8Q Ch. 5 - Prob. 9Q Ch. 5 - Prob. 1BE

Knowledge Booster

Recommended textbooks for you

FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education