Goodwill Impairment: An Essential Guide (2 hrs)

Course No. CAM024
Format: Online pdf (36 pages). Printed book available.
Instructional Delivery Method: QAS Self-Study
Prerequisites: None
Advance Preparation: None
Level: Overview
CPE Credit: 2 hrs.
Field of Study: Accounting
Course Author: Kelen F. Camehl, CPA, MBA
Course expiration:  You have one year from date of purchase to complete the course.
Course Revision Date: January 2025

Course Topics:
* Business Combination Refresher
* Initial Recognition of Goodwill
* Overall Accounting for Goodwill
* Impairment Testing Requirements
* Qualitative Test vs. Quantitative Test
* Performing the Qualitative Test
* Performing the Quantitative Test
* Goodwill Impairment Accounting Alternative
* Goodwill Disclosures for Public Entities
* Goodwill Disclosures for Accounting Alternative for Goodwill

Learning Objectives:

Upon completion of this course, you will be able to:

• Identify the recognition requirements related to goodwill
• Recognize overall characteristics of goodwill impairment testing
• Differentiate between the qualitative and quantitative test of goodwill impairment
• Identify key characteristics of the accounting alternative for goodwill
• Recognize the key disclosure requirements for goodwill and goodwill impairment losses

Introduction

Goodwill is a type of intangible asset that can only arise in a business combination.  While this course is focused primarily on the subsequent testing requirements of goodwill (i.e., goodwill impairment testing), it’s important to first understand how goodwill is created, measured, and recorded by an entity.

Goodwill is created in a business combination when the purchase price paid for an acquired company exceeds the fair value of its identifiable net assets, including both tangible and intangible assets. It represents the premium a buyer is willing to pay for factors (not separately identifiable or measurable) such as, but not limited to, the following:

• Brand reputation
• Customer relationships
• Workforce
• Synergies
• Market position

Goodwill is considered a key asset because it reflects the strategic and economic benefits expected from an acquisition. However, since goodwill does not have a physical form or finite life, it is critical to test it for impairment regularly to ensure it is not overstated on the balance sheet. Impairment testing ensures that the carrying amount of goodwill reflects its actual recoverable value.