Which one of the following potential audit problems is not true in affecting goodwill impairment valuations?
A)Goodwill arising from acquisitions can be netted into one test at the operating segment level,but not netted at the company level.
B)Market valuation may be volatile.A material temporary decline in market value may not be a good indicator of FMV.
C)FMV might not exist,might require independent appraisals by investment bankers or estimates using cash flow and discounted present value factors.
D)No assumptions are required about competition,economic development,product placement,and so forth.

Question

Quizplus · Accepted Answer

Option D is not true as assumptions about competition, economic development, product placement, and other factors are required to estimate the fair value of goodwill. The other options are true in affecting goodwill impairment valuations. Option A highlights the difference between the company-level and operating segment-level tests. Option B acknowledges the volatility of market valuations and the possibility of temporary declines not being indicative of fair market value. Option C recognizes the difficulty of determining FMV and the need for independent appraisals or estimates using cash flow and discounted present value factors.

Which One of the Following Potential Audit Problems Is Not