Chapter 4 Analysis Case1 - M ichael Moradian Prof Henry...

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Michael Moradian Prof. Henry Acct 539 2-4-2010 Chapter 4 Analysis Case 1. The way in which Time Warner initially determined its goodwill during the acquisition date is quiet simple. Time Warner took the Fair Value of AOL and compared that to the book value of AOL, an excess, after amortizing assets and liabilities was put into goodwill. 2. The way Time Warner figured the impairment of $99 billion dollars was a simple impairment of goodwill test. The fair value of the reporting unit was tested to see if it was less than the carrying value. If this was true, then you had to perform another test. The second test tested to see if good will’s implied value was less than its carrying value. If goodwill’s fair value has declined below its carrying value, an impairment loss is recognized for the excess carrying value over fair value. 3. The business areas that AOL Time Warner designated as its reporting units were video programming, high speed, administrative, and advertising. The
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