Rapture,Inc.compares the fair value of the reporting unit related to goodwill to the reporting unit's carrying value,including goodwill.The fair value is less than the carrying value.This implies which of the following?
A)that the difference must be reported as impairment expense in the balance sheet.
B)that impairment exists and that goodwill must be written-down.
C)that the goodwill is supported by valid assumptions and may remain.
D)that the impaired value of the goodwill is greater than the implied value of the underlying assets.

Question

Quizplus · Accepted Answer

If the fair value of the reporting unit is less than its carrying amount, it indicates that there is impairment, and the goodwill should be written down to its implied fair value. Therefore, option B is the correct choice. Option A is not appropriate because impairment expense is recorded only for the amount of goodwill that exceeds its implied fair value. Option C is incorrect because if the fair value is less than the carrying value, it implies that the goodwill is impaired. Option D is not relevant, as it refers to the implied value of underlying assets.