Goodwill recognized in a business combination must be allocated among a firm's identified reporting units. If the fair value of a particular reporting unit with recognized goodwill falls below its carrying amount, which of the following is true? A. No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount. B. The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair value. C. A goodwill impairment loss is recognized for the difference between the reporting unit's fair value and carrying amount. D. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value.

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Business

Isla Brandt

25 March, 11:41

Goodwill recognized in a business combination must be allocated among a firm's identified reporting units. If the fair value of a particular reporting unit with recognized goodwill falls below its carrying amount, which of the following is true? A. No goodwill impairment loss is recognized unless the implied value for goodwill exceeds its carrying amount. B. The reporting unit reduces the values assigned to its long-term assets (including any unrecognized intangibles) to reflect its fair value. C. A goodwill impairment loss is recognized for the difference between the reporting unit's fair value and carrying amount. D. A goodwill impairment loss is recognized if the carrying amount for goodwill exceeds its implied value.

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Alexzander · Answer 1

Answer: Option C

Explanation:

Impairment loss can be defined as the reduction in the value of goodwill of firm. Goodwill impairment is evaluated in two stages : -

1. First compare fair value with carrying value.

2. If the carrying value is above fair value that means the impairment has occurred and it is calculated by subtracting fair value from carrying value.