One year after acquisition date, acquired goodwill was regarded as having become impaired by $10 000. The appropriate consolidation adjustment in relation to the impairment will include the following line:
A) DR Goodwill $10 000
B) CR Impairment loss $10 000
C) CR Accumulated impairment losses $10 000
D) CR Business combination valuation reserve $10 000

Question

Quizplus · Accepted Answer

Impairment losses on goodwill are recognised in the consolidated financial statements by debiting goodwill and crediting the accumulated impairment losses account. This accumulated impairment losses account is a contra account to goodwill and reduces the carrying amount of goodwill to its recoverable amount. Therefore, the appropriate consolidation adjustment in this scenario would be to credit the accumulated impairment losses account by $10 000.

One Year After Acquisition Date, Acquired Goodwill Was Regarded as Having