Question

Determination of Implied Fair Value:

Fair Value of assets including Goodwill $445 Million

(Fair Value of Assets excluding Goodwill) ($425 Million)

=Implied Fair Value of Goodwill $25 Million

Measurement of Impairment Loss:

Book value of Goodwill $125 Million

(Implied Fair Value of Goodwill) ($20 Million)

=Impairment Loss $105 Million

Journal Entry for Impairment Loss:

Date Dec 31

Impairment loss on Goodwill Debit $105,000,000

Goodwill Credit $105,000,000

1.Based on the information above can early adoption of the FASB ASU 2017-4 standards update be used if so determine the amount of goodwill impairment loss using the data above and if applicable prepare the journal entry and indicate how the impairment should be reported on the income statement, balance sheet and cash statement

2.According to FASB ASU 2017-4, what would be the financial note disclosure?

Answer 1

As per FASB ASU 2017-4

Impairment of goodwill is the condition that exists when the carrying amount of a reporting unit that includes goodwill exceeds its fair value. A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit. However, an entity shall consider the related income tax effect from any tax-deductible goodwill, if applicable, in accordance with paragraph 350-20-35-8B when measuring the goodwill impairment loss

By this amendment word implied fair value is replaced with fair value only along with goods will measurement criteria

Therefore, in above case

Implied fair value is 20 million

Where’s measured fair value is 25 million

Journal entry on period ending will be as follows

Impairment Loss on Goodwill Dr.    100 million

To Accumulated Impairment Loss         100 Million

2. Financial Note discloser

As per FASB following is the discloser requirements

The changes in the carrying amount of goodwill during the period shall be disclosed, showing separately a. The gross amount and accumulated impairment losses at the beginning of the period

b. Additional goodwill recognized during the period

c. Adjustments resulting from the subsequent recognition of deferred tax assets during the period

d. Goodwill included in a disposal group classified as held for sale and goodwill derecognized during the period without having previously been reported in a disposal group classified as held for sale

e. Impairment losses recognized during the period