Question

Write a team consensus response of 525 to 700 words to include the following: • Provide detailed rational of why goodwill must be adjusted for impairment. • List the tests for impairment. • Explain the meaning of a non cash impairment charge. Format your submission consistent with APA guidelines.

Answer 1

1)Provide detailed rational of why goodwill must be adjusted for impairment

U.S. generally accepted accounting principles (GAAP) require companies to review their goodwill for impairment on an  annually basis at a reporting unit level. Events that are considered as the main causes of  goodwill impairment include deterioration in economic conditions, increased competition, loss of key personnel, and regulatory action

Explanation:

1)Provide detailed rational of why goodwill must be adjusted for impairment

U.S. generally accepted accounting principles (GAAP) require companies to review their goodwill for impairment on an  annually basis at a reporting unit level. Events that are considered as the main causes of  goodwill impairment include deterioration in economic conditions, increased competition, loss of key personnel, and regulatory action

2) List the tests for impairment.

Impairment test is an accounting procedure carried out to find out if an asset is impaired( i.e. whether the economic benefits that the asset embodies have dropped drastically.)

As per US GAAP, if the carrying value of an asset exceeds the sum of undiscounted expected cash flows of an asset, the asset is impaired

3)Explain the meaning of a non cash impairment charge

A non-cash charge is a accounting expense that does not involve a cash payment.  

(Depreciation, amortization, depletion, stock-based compensation, and asset impairments are common non-cash charges that reduce earnings but not cash flows)