When Is a Goodwill Impairment Loss Recognized

question 33

Multiple Choice

When is a goodwill impairment loss recognized?

• A) Only after both a quantitative and qualitative assessment of the fair value of goodwill of a reporting unit.
• B) After only definitive quantitative assessments of the fair value of goodwill is completed.
• C) After only definitive qualitative assessments of the fair value of goodwill is completed.
• D) If the fair value of a reporting unit falls to zero or below its original acquisition price.
• E) Never.

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Definitions:

Outstanding Shares

Refers to the total number of shares of stock that are currently owned by shareholders, including those held by institutional investors and company insiders.

Fair Value

The payment one could achieve by divesting an asset or the liability assumed in an exchange among market actors on the designated evaluation date.

Acquisition

The process by which one company takes over another, either through the purchase of its shares or assets.

Journal Entries

The method used in accounting to record all the financial transactions of a business, ensuring every credit entry is matched with a debit entry.