The First Step in Determining Goodwill Impairment Involves Comparing The

question 28

Multiple Choice

The first step in determining goodwill impairment involves comparing the:

• A) implied value of a reporting unit to its carrying amount (goodwill excluded).
• B) fair value of a reporting unit to its carrying amount (goodwill excluded).
• C) implied value of a reporting unit to its carrying amount (goodwill included).
• D) fair value of a reporting unit to its carrying amount (goodwill included).

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Definitions:

Revaluation Accounting

A method under International Financial Reporting Standards (IFRS) that allows an entity to adjust the book value of its assets and liabilities to their fair value.

Tangible Assets

Physical assets that have a form you can touch or handle, like buildings, machinery, and land.

Acquirer

The entity that obtains control of another entity (acquiree) in a business combination, typically through the purchase of its equity interests or assets.

Negative Goodwill

Occurs when the price paid for an acquisition is less than the fair market value of its net tangible assets, often recognized as a gain in the acquirer's financial statements.