In a Standard Audit Program for Goodwill Impairment Testing, If

question 126

Multiple Choice

In a standard audit program for goodwill impairment testing, if the original reporting unit no longer exists because operations have been fully integrated into operations of the parent company, which approach should the auditor take?

• A) Compare market value with carrying value. A market value less than carrying value is presumptive evidence that goodwill has been impaired.
• B) Compare fair value with realizable value. A fair value less than realizable value is presumptive evidence that goodwill has been impaired.
• C) Compare book value with realizable value. A book value less than realizable value is presumptive evidence that goodwill has been impaired.
• D) Compare book value with market value. A market value less than book value is presumptive evidence that goodwill has been impaired.

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Definitions:

Portfolio Weight

The percentage composition of a particular holding or investment relative to the total value of the portfolio.

Expected Return

The forecasted amount of profit or loss an investment is projected to generate, expressed as a percentage of the total invested capital.

Portfolio Weight

The percentage composition of a particular holding in relation to the total value of the portfolio, used to assess diversification and risk.

Security Market Line

A graphical representation in financial market theory that depicts the relationship between risk (measured as beta) and expected return for the entire market.