The fair value of net identifiable assets of a reporting unit of X Company is $300,000.On X Company's books,the carrying value of this reporting unit's net assets is $350,000,including $60,000 goodwill.If the fair value of the reporting unit as a whole is $335,000,what amount of goodwill impairment will be recognized for this unit?

Question

Quizplus · Accepted Answer

The first step is to compare the fair value of the reporting unit with the carrying value of the net assets, including goodwill.

Fair value of reporting unit: $335,000 
Carrying value of net assets: $350,000

Since the carrying value exceeds the fair value, there is an indication that the goodwill could be impaired.

The next step is to calculate the implied value of goodwill.

Implied value of goodwill = Fair value of reporting unit - Fair value of net identifiable assets 
Implied value of goodwill = $335,000 - $300,000 
Implied value of goodwill = $35,000

The carrying value of goodwill is $60,000, which means there is impairment.

Goodwill impairment = Carrying value of goodwill - Implied value of goodwill 
Goodwill impairment = $60,000 - $35,000 
Goodwill impairment = $25,000

Therefore, the amount of goodwill impairment that will be recognized for this unit is $25,000, which is option C.

The Fair Value of Net Identifiable Assets of a Reporting