Goodwill Impairment Illustration

Goodwill Impairment Illustration - Accounting 401...

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Accounting 401 Illustrations of Goodwill Impairment 1. Let’s suppose that a merger business combination resulted in the following: Identifiable assets acquired (including all acquired intangible assets) $15,000,000 Liabilities assumed (3,800,000) Goodwill from the combination 1,540,000 Total cost $12,740,000 Let’s also say that two new reporting units are acquired by the combinor. We need to assign identifiable assets acquired and liabilities assumed to the new reporting units. That allocation follows: New RU A New RU B Identifiable assets acquired $10,000,000 $5,000,000 Liabilities assumed (2,200,000) (1,600,000) Net assets assigned $ 7,800,000 $3,400,000 The fair value of New Reporting Unit A is estimated to be $8,700,000, while the fair value of New Reporting Unit B is estimated to be $4,700,000. This would mean that the preliminary assignment of goodwill would be as follows: New Reporting Unit A ($8,700,000 – 7,800,000) $ 900,000 New Reporting Unit B ($4,700,000 – 3,400,000) 1,300,000
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Goodwill Impairment Illustration - Accounting 401...

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