According to the FASB ASC Regarding the Testing Procedures for Goodwill

question 88

Multiple Choice

According to the FASB ASC regarding the testing procedures for Goodwill Impairment, the proper procedure for conducting impairment testing is:

• A) Goodwill recognized in consolidation may be amortized uniformly and only tested if the amortization method originally chosen is changed.
• B) Goodwill recognized in consolidation must only be impairment tested prior to disposal of the consolidated unit to eliminate the impairment of goodwill from the gain or loss on the sale of that specific entity.
• C) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by quantitative assessment of the possible impairment of the fair value of the unit relative to the book value, and then a qualitative assessment as to why the impairment, if any, occurred for disclosure.
• D) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for disclosure.
• E) Goodwill recognized in consolidation may be impairment tested in a two-step approach, first by qualitative assessment of the possibility of impairment of the unit fair value relative to the book value, and then quantitative assessments as to how much impairment, if any, occurred for asset write-down.

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Definitions:

Controlling Interest

Ownership interest in a business entity through holding more than 50% of its voting shares, granting the ability to control decisions and policies.

Equity Method

Accounting for investments with significant influence, where the investment's carrying amount is adjusted for the investor's share of the investee's profits or losses.

Small Acquisitions

Refers to the purchase of smaller companies, typically involving less financial risk and a simpler integration process compared to larger mergers and acquisitions.

Consolidated Net Income

The total earnings of a company and its subsidiaries after taxes and interest, adjusted for minority interests.