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Finance & Accounting
Pages 3 (753 words)
Finance and Accounting: Goodwill Impairment Introduction Goodwill Impairment means that the value of goodwill of a company diminishes as compared to the time of its purchase. In other words the fair value of the goodwill is less than the value that is required to carry it.
However, there are several noticeable differences in the two accounting approaches as listed below: In the context of allocation of Goodwill, allocation is done to an operating unit in case of U.S. GAAP. In IFRS language, its allotment is done to a small group of assets that generates flow of cash and such unit has to be smaller than the operating segment of a company. In the context of the recognition of the loss of impairment, the US GAAP considers such a case if the implied fair value exceeds the amount for carrying of a particular reporting unit and the amount for carrying of the goodwill (Alexander & Britton, 2004). It is a two step approach. On the other hand, in case of IFRS, which follows a one step approach, weigh cash generating unit’s amount carried against the amount that can be recovered. Impairment of loss is spotted when the former is greater than the latter. In US GAAP parlance, the loss of impairment is the amount of difference between the carried amount of goodwill and the reporting unit’s fair value that is implied. In terms of IFRS, it is the amount the former exceeds the amount that can be recovered. The loss thus arisen would be provisioned for Goodwill impairment until the latter is zero. Pros and cons of measuring Goodwill Impairment The measurement of goodwill has several positives aspects to it. ...
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