Goodwill Impairment Essay examples

Words: 1285

Pages: 6

Open Document

Case 1 Goodwill Impairment Testing

Should management have performed an interim goodwill impairment test as of September 30, 2010?
Galaxy Sports Inc. (Galaxy) is a U.S. based manufacturer of sports equipment. It is an SEC registrant with one operating segment with three separate reporting units: fitness, golf and hockey. The fitness is the largest division of Galaxy with allocated goodwill of $200 million. The golf division reports $130 million of goodwill and the hockey has $30 million of goodwill. Each division has been a reporting unit for a number of years. Due to the complexities involved with the calculation of goodwill and resource restraints in 2009, Galaxy decided to hire Big Time LLC (Big Time) to perform three annual ASC …show more content…
Examples of such events or circumstances include a significant adverse change in legal factors, the business climate, and unanticipated competition.
Harris interactive had a significant change in business climate due to a poor economy which led to dramatic stock price decline. In a similar manner, Galaxy had a steady stock price and earnings decline in the first 3 quarters of 2010 and were dealing with a slumping economy. This was further affected by competitors in China who were able to distribute similar products at a large discount appealing to consumers in a price sensitive economy. An interim test should have been provided based on the evidence cited. Assume no interim test is required for Galaxy, was management justified in carrying forward the prior-year goodwill impairment test for the Fitness Equipment and Hockey Equipment reporting units? There are a few reasons why Galaxy Sports should not be required to do an interim goodwill impairment test as of September 30, 2010. The high sales of last year and the forecasted

Goodwill: Goodwill and internally Generated Goodwill Essay

Definition of goodwill Goodwill is “an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.” (AASB 138, para.11) It can be divided into two categories: internally generated goodwill (IGG) and purchased goodwill. IGG arises form internal operations and differs from the goodwill acquire in business combination (Dagwell, Wines & Lambert 2012, p 207) Purchased goodwill refers to the…

Words 2951 - Pages 12

Accounting- Ida Impairment Essay

GAAP Reporting for Goodwill Impairment Under GAAP reporting rules “the first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill” (ASC 350-20-35-4). ASC 350-20-35-6 states that if the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. Ida’s reporting unit fair…

Words 1602 - Pages 7

financial reportog Essay

Testing for Goodwill Impairment. The tests for goodwill impairment are similar under U.S. GAAP and IFRS. Goodwill is not considered a separable asset; therefore, goodwill impairment is assessed at the reporting unit (U.S. GAAP) or cash-generating unit (IFRS) level. If the fair value of a unit exceeds its carrying amount (after impairment tests for tangible and intangible assets other than goodwill have been performed and carrying amounts adjusted), goodwill is impaired. The amount of goodwill impairment…

Words 2106 - Pages 9

Client Understanding

of stating transaction. For this paper we wanted to discuss four key factors: Adjusting lower cost of market inventory on valuation, Capitalizing interest on building construction, Recording gain or loss on asset disposal, and Adjusting goodwill for impairment. To explain to the client why this information is important, we will discuss each topic. First we decided which topic we would do our research on, and then we assembled all the data and analysis to create this paper. Adjusting lower cost…

Words 1366 - Pages 6

Impairment Test Essay examples

2 Why impairment testing is carried out? 2 How existence of goodwill affects the impairment test? 3 How often the test needs to carried out? 3 Example of Goodwill Impairment Testing 3 Three steps are required for goodwill impairment testing: 4 Conclusions…

Words 812 - Pages 4

Essay about Eagle Impairment Case Study

ACTG 351 Eagle Impairment Case Due: Wednesday, May 4 (at the beginning of class). Also, please be prepared to discuss the case and your solution in class on this date. Required: Refer to the current, relevant accounting guidance to answer the four questions of the case. Please make particular note about whether the question is asking you to use U.S. GAAP, IFRS, or both. Groups: For this case, you will work in groups of two or three students. I will let you pick your group if you prefer, but…

Words 1307 - Pages 6

What Are Some Of The Conditions From This Acquisition That Indicate The Acquisition Of Alcan Case Study Solution

dropped a 22 per cent of underlying profits excluding impairments of $US16.9 billion. The company announced $US9.3 billion of impairments, primarily as a result of its disastrous acquisition of Alcan in 2007. There was a pre-tax charges announced of $US2.84 billion as an attributed to BHP’s ill-timed $US4.75 billion acquisition of Fayetteville dry shale gas assets in the US just before a plunge in the gas price. BHP did not take an impairment on its $US15.1 billion acquisition of shale gas producer…

Words 1145 - Pages 5

Week 2 Paper

One of the requirements of the Generally Accepted Accounting Principles (GAAP) is that inventory should be recorded at LCM (lower cost or market) rule. According to the cost principle, a company’s assets are generally stated in the financial statements. When it comes to inventory, cost principle is deserted and lower of cost or market rule takes its place. The LCM says that inventory should be measured at the lower of cost or market value (Accounting Explained). Market value basically means the…

Words 1025 - Pages 5

Impairment Quiz Questions 2014 1 1 Essay

ADVANCED FINANCIAL ACCOUNTING 260 IMPAIRMENT QUIZ QUESTIONS 1. When should an entity conduct an impairment test? (2 Marks) Assets that are consider to have uncertain carrying amounts must be tested every year for impairment. Goodwill acquired in a business combination Intangible assets with an indefinite useful life Intangibles not yet ready for use Impairment testing of all other assets is required only if there is an indication that they might be impaired due to events…

Words 1218 - Pages 5

MEMORANDUM ACCT322 Winter Essay

asset turnover/ return on assets. In 2013, J&J reported three different types of long-lived assets on their Consolidated Balance Sheet. The first kind reported was Plant, Property, and Equipment. The second one was Intangible Assets and third was Goodwill. We will be investigating these three assets in further detail. J&J reported $16,710 million net worth of PP&E. Within this major asset category are many sub accounts: Land & Improvements, Building & Building Equipment, and Construction in Progress…

Words 819 - Pages 4