Goodwill and Other, ASC 350

Goodwill
–> not amortized
[asc 350-20-35-1]

   –> tested for impairment
at the level of a reporting unit

Impairment Loss
–> two step approach
–> step 1: impairment test for a reporting unit
step 2: impairment test for goodwill

   Step 1
–> is (a) < (b)?
(a) fair value of a reporting unit
(b) carrying amount of a reporting unit
–> if yes, go to step

   Step 2
–> is (c) < (d)?
(c) implied fair value of goodwill of the reporting unit
(d) carrying amount of goodwill of the reporting unit
–> if yes, impairment loss is recognized

   “Reversal” of impairment loss is not allowed.
[asc 350-20-35-13]

[IFRS]
IAS 36: Impairment of Assets
Goodwill impairment test
[IAS 36-pr 80-108]

   1. Goodwill is allocated to Cash Generating Unit (CGU)
2. Impairment test for CGU: Is recoverable amount < carrying amount?
3. Impairment loss of CGU
–> allocated to reduce the carrying amount of goodwill, first
–> then, allocated to other assets

[U.S. GAAP]
asc 350-20
1. Impairment test for “reporting unit”
–> Is fair value of reporting unit < carrying amount?
2. If yes, impairment test for “goodwill”
–> Is implied fair value of goodwill < carrying amount?
3. If yes, impairment loss for goodwill is recognized.

 

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