Question #23
Reading: Reading 8 Intercorporate Investments
PDF File: Reading 8 Intercorporate Investments.pdf
Page: 9
Status: Correct
Correct Answer: B
Question
According to U.S. GAAP, goodwill is most likely to be considered impaired if the reporting unit's:
Answer Choices:
A. implied value of goodwill is less than book value of goodwill
B. carrying value (including goodwill) is greater than its fair value
C. tangible assets acquired in a business combination decrease in value
Explanation
To test goodwill for impairment under U.S. GAAP, the carrying value of the reporting unit
(including goodwill) is compared to the fair value of the reporting unit. After an
impairment has been detected, the loss is calculated as the difference between the book
value of goodwill and the implied value of goodwill.