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Goodwill and Other Intangible Assets

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When should a consolidated entity recognize a goodwill impairment loss?

a. If both the market value of a reporting unit and its associated implied goodwill fall below their respective carrying values.
b. Whenever the market value of the entity declines significantly.
c. If the market value of a reporting unit falls below its original acquisition price.
d. Annually on a systematic and rational basis.
e. None of the above.
f. Cannot determine answer with facts presented.

According to the SFAS 142, "Goodwill and Other Intangible Assets," if no legal, regulatory, contractual, competitive, economic, or other factors limit the life of an intangible asset, the asset's cost is allocated to expense over which of the following?

a. 20 years.
b. 20 years with an annual impairment review.
c. infinitely.
d. indefinitely (no amortization) with an annual impairment review until its life becomes finite.
e. None of the above.
f. Cannot determine answer with facts presented.

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Solution Summary

The solution uses some examples to explain goodwill and Other Intangible Assets

Solution Preview

Answer 1:
(a) is the correct answer.
Test 1: Each year ask: does the fair value of a reporting unit exceed its carrying value (including the carrying value of goodwill)?
If "yes," no impairment is to ...

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