ACC410 – Advanced Accounting

Week 2 – Research and Analysis Case – Goodwill Impairment

Part A –respond to the following questions and support the “yes” or “no”
answer you give with appropriate citations from the FASB Codification or IAS
reference.
1. Is impairment of goodwill reversible under United States Generally
Accepted Accounting Principles (“GAAP”)? No, according to ASC 350 –
impairment of goodwill is prohibited
2. Is impairment of goodwill reversible under International Financial
Reporting Standards (“IFRS”)? “Reversal of an impairment loss for
goodwill is prohibited.” [IAS 36.124]

Part B – Compare and contrast the requisite goodwill impairment testing

procedures under IFRS vs U.S. GAAP?
Impairment Testing Procedures
Accounting
US GAAP – Per ASC 350 IFRS
Standard
Step 1 — Fair value of the
reporting unit is compared
with its carrying amount, The recoverable amount of
including goodwill. If fair a CGU (higher of (1) fair
value is greater than value less costs to sell and
carrying amount, step 2 is (2) value in use) is
skipped because goodwill is compared with the
not impaired. carrying amount. The
Testing Step 2 — The "implied fair impairment loss is
procedures value" of reporting-unit allocated by (1) reducing
goodwill is compared with any goodwill of the CGU
its carrying amount. If the and then (2) reducing the
carrying amount exceeds carrying value of other
the implied fair value of assets of the CGU on a pro
goodwill, an impairment rata basis, subject to
loss is recognized in an certain constraints.
amount equal to that
excess.