ExpertHard1 markMultiple Choice
CPA · Question 23 · Area II: Technical Accounting
A reporting unit has a carrying amount of $500,000, including $100,000 of goodwill. The fair value of the reporting unit is determined to be $460,000. Under ASC 350, what is the amount of goodwill impairment loss to be recognized?
A reporting unit has a carrying amount of $500,000, including $100,000 of goodwill. The fair value of the reporting unit is determined to be $460,000. Under ASC 350, what is the amount of goodwill impairment loss to be recognized?
Answer options:
A.
$0
B.
$40,000
C.
$100,000
D.
$60,000
How to approach this question
Compare Carrying Amount (CA) to Fair Value (FV). If CA > FV, the difference is the impairment loss, limited to the total amount of goodwill allocated to that unit.
Full Answer
B.$40,000✓ Correct
Under the simplified test (ASU 2017-04), impairment is the amount by which the carrying amount exceeds the fair value, not to exceed the total goodwill. $500k - $460k = $40k loss.
Common mistakes
Applying the old Step 2 (implied fair value of goodwill) calculation.
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