For private enterprises that have acquired goodwill in a business combination, which of the following is considered a change of circumstances for purposes of testing for goodwill impairment?
A)A large unfavourable income tax reassessment
B)Sale of a capital asset for a small loss
C)A major competitor has ceased operations
D)Retirement of the subsidiary's operations manager

Question

Quizplus · Accepted Answer

A large unfavourable income tax reassessment is considered a change of circumstance for purposes of testing for goodwill impairment because it can significantly affect the company's financial performance and therefore, the value of goodwill.

Option B is not considered a significant change of circumstance as it only represents a small loss on a single capital asset.

Option C may represent a positive change in the market, but it may not necessarily impact the value of goodwill as it depends on several other factors.

Option D relates to an internal personnel change and is not considered a change of circumstance for the purposes of testing for goodwill impairment.

For Private Enterprises That Have Acquired Goodwill in a Business