Should dynamic and zd be combined for purpose of goodwill

Assignment Help Accounting Basics

Reference no: EM132467998

Codification to Research a Complex Accounting Issue: The Case of Goodwill Impairment at Jackson Enterprises

Note: The two-step impairment test was US GAAP at December 31, 2014, which is the key date for this case study. The FASB has since issued Accounting Standards Update (ASU) 2017-04, which eliminate Step 2 of the impairment test. However, for answer the requirements of this case study below, please perform the two-step impairment text which was US GAAP at December 31, 2014. For your information, today, the quantitative impairment test now includes only one step, which is the comparison of the carrying value to the fair market value of the reporting unit, with the difference representing the recognized goodwill impairment. While the quantitative aspect of the test has changed under ASU 2017-04, the FASB did not remove the preliminary, qualitative assessment option to determine the appropriateness of the quantitative test.

Read the Case of Goodwill Impairment at Jackson Enterprises attached below. After reading the case study, answer the questions provided.

Financial reporting personnel at Jackson Enterprises (JE) are in the process of completing year-end activities, including necessary adjusting of entries to the consolidated financial statements. While JE has not previously believed it necessary to adjust its recognized goodwill from the Dynamic and ZD acquisitions, the valuation of goodwill is, nonetheless, a prominent concern in the closing process. Assume you are asked to research the financial statement issues surrounding the goodwill recorded for the Dynamic and ZD subsidiaries.

Problem 1: Prepare a paper to address the questions below. In memorandum format, detail the issues involved, the judgements you made based on authoritative literature, and your recommendations for the direction of the goodwill valuation as it relates to Dynamic and ZA. In other words, does the evidence suggest further action is required in determining the appropriate valuation of good will? If so, what steps need to be taken?

Note: Remember that textbooks are not considered authoritative guidance in accounting research.

Question 1: Identify and cite the relevant topics/subtopics from the FASB Accounting Standards Codification for this case.

Question 2: Identify the specific accounting issue that you believe needs to be initially addressed for JE's consideration of goodwill regarding both Dynamic and ZD.

Question 3: What does the qualitative evidence from the case indicate about whether JE should perform the two-step impairment test? In your response, identify specific factors discussed in the Codification and relate them to the information provided to you in the case.

Question 4: Beyond the assessment of qualitative factors, what other evidence should be considered for the purpose of the analysis? What does this information suggest? For Dynamic, what do you think is the most appropriate fair value amount to use in assessing the fair value of this reporting unit? Explain. Why is this important?

Question 5: Based upon the information provided above, should Dynamic and ZD be combined or separated for the purposes of the goodwill analysis? Explain. Why is this important?

Question 6: Based upon your initial analysis, do you think the $200 million goodwill balance (i.e., the $150 million for Dynamic and the $50 million for ZD) is the appropriate valuation for goodwill on the December 31, 2014 balance sheet of JE?

Reference no: EM132467998

Questions Cloud

Analyzing a company ability to produce cash flow : Analyzing a company's ability to produce cash flow from its regular operations, it's important to watch the different uses management is giving to that money

Computing corporate valuation method : In your experience, which corporate valuation method is best out of: the Net Worth Method, Net Income Method, P/E ratio Method, Outstanding Shares Method

How much are shareholders giving up to allow ben and jerry : How much are shareholders giving up to allow Ben and Jerry's management to pursue objectives other than long-run profitability?

What is the present value of the annuity stream option : Assuming again that your money can earn 3% a year, what is the present value of the annuity stream option? (round to the nearest dollar) Use excel formula.

Should dynamic and zd be combined for purpose of goodwill : Based upon the information provided above, should Dynamic and ZD be combined or separated for the purposes of the goodwill analysis? Explain.

Distinguish between needs and demands for services : Question 1: Name two reasons it is important to distinguish between needs and demands for services.

Produce sequence diagrams corresponding to the prototypes : Draw the diagrams using a UML case tool. For each section some marks will be given for some explanation and design choices.

Briefly research career opportunities that require knowledge : Briefly research career opportunities that require knowledge or experience with managerial accounting. List at least two potential positions

Create console program that prompt user to enter information : Create a console program that prompts the user to enter these three pieces of information: The name of their favorite restaurant. The address of the restaurant.

User Account

All Pages