A company has a reporting unit with a carrying amount of $500,000, including $100,000 of goodwill. The fair value of the reporting unit is determined to be $450,000. Under ASC 350, what is the amount of goodwill impairment loss?

Answer options:

$50,000

$100,000

$50,000, but only if the implied fair value of goodwill is less than its carrying amount.

How to approach this question

Recall the simplified Goodwill Impairment Test (One Step). If Carrying Amount > Fair Value, Impairment = Difference (capped at Goodwill amount).

Full Answer

B.$50,000✓ Correct

Impairment is the amount by which the Carrying Amount ($500,000) exceeds the Fair Value ($450,000). Loss = $50,000. Since this is less than the total goodwill ($100,000), the full $50,000 is recognized.

Common mistakes

Applying the old Step 2 implied fair value test.

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