Question

Which statement is true concerning IFRS goodwill impairment reporting?
Select one:
A. IFRS does not allow qualitative evaluation of goodwill impairment.
B. IFRS does not require goodwill impairment recognition.
C. IFRS allows goodwill impairment to be reported in other comprehensive income.
D. IFRS allows goodwill impairment to adjust fair value reserves in equity.

An acquisition requires revaluation of a subsidiary's date-of-acquisition inventory from a book value of $5 million to fair value of $3 million. The subsidiary uses LIFO and inventory purchases exceed sales in every year following acquisition.

Which statement is true concerning the consolidation eliminating entries for this revaluation?
Select one:
A. Each year following acquisition, entry (R) reduces inventory and entry (O) increases cost of goods sold by $2 million.
B. Each year following acquisition, entry (R) reduces inventory by $2 million, but entry (O) is not required.
C. No entry (R) is required after the first year, but eliminating entry (O) reduces cost of goods sold by $2 million in the first year.
D. No entries are required in any year.

Which statement is true concerning U.S. GAAP for the qualitative evaluation of goodwill?
Select one:
A. You don't have to quantitively evaluate goodwill for impairment if it is more likely than not that the reporting unit's book value is less than its fair value.
B. You don't have to quantitatively evaluate goodwill for impairment if it is more likely than not that the reporting unit's fair value is less than its book value.
C. You don't have to quantitatively evaluate goodwill for impairment if the acquired subsidiary is expected to continue operating in the foreseeable future.
D. The qualitative goodwill evaluation is based on general information on the economy, rather than specific information about the reporting unit's performance.

Answer 1

1. answer is option C

C. IFRS allows goodwill impairment to be reported in other comprehensive income.

IFRS allows goodwill impairment in other comprehensive income when the revaluation increases the value

2. answer is option B

B. Each year following acquisition, entry (R) reduces inventory by $2 million, but entry (O) is not required.

LIFO method of inventory valuation increase the cost of goods sold. But this may change after acquisition.

3.answer is option D

The qualitative goodwill evaluation is based on general information on the economy, rather than specific information about the reporting unit's performance.

On the basis of general information, it is determined if quantitative goodwill evaluation is required.

answered by: anonymous