Question 1

A reporting unit has a carrying amount of $500,000, including $100,000 of goodwill. The fair value of the reporting unit is determined to be $460,000. Under ASC 350, what is the amount of goodwill impairment loss to be recognized?

Accepted Answer

Compare Carrying Amount (CA) to Fair Value (FV). If CA > FV, the difference is the impairment loss, limited to the total amount of goodwill allocated to that unit.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Applying the old Step 2 (implied fair value of goodwill) calculation.

A reporting unit has a carrying amount of $500,000, including $100,000 of goodwill. The fair value of the reporting unit is determined to be $460,000. Under ASC 350, what is the amount of goodwill impairment loss to be recognized?

How to approach this question

Full Answer

Common mistakes

Practice the full CPA BAR Practice Exam 2

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