Question

at the end of 2022, adam co. had a fair value of $2,700,000. on that date, assets had a book value of $3,000,000 (including $200,000 goodwill) and a fair value of $2,900,000 (excluding goodwill). liabilities had a book and a fair value of $1,100,000. how much goodwill impairment loss should the company recognize at the end of 2022 (if any)? (enter a positive number for the impairment loss, or enter 0 for none).

Answer 1

The goodwill impairment loss the company recognize at the end of 2022 is -$700000

What is goodwill impairment?

Goodwill impairment is an accounting charge recognized by an entity when the carrying amount of goodwill exceeds the fair value in the financial statements. In accounting, goodwill is recognized after a company acquires assets and liabilities and pays a price in excess of their net identifiable value. Goodwill impairment occurs when an acquired asset's ability to generate cash flow declines, causing the fair value of goodwill to fall below its carrying value. Perhaps the most famous goodwill impairment was the $54.2 billion reported in the 2002 AOL Time Warner, Inc. merger. At the time, this was the largest write-down of goodwill the company has ever reported.

The calculation is mentioned in the table below:

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