Jakobe Company acquires an average of two companies per year in its efforts to integrate and expand.Which of the following statements best represents Jakobe's treatment of multiple goodwill in the assessment of impairment?
A)All goodwill must be netted at the reporting level for testing and isolated at the individual subsidiary level.
B)The goodwill of a single unit will be selected at random each year for testing and all operating units must be cycled in testing every five years.
C)Goodwill within operating segments can be netted,but goodwill that exists in different operating segments cannot be offset.
D)Goodwill is not a factor in the testing of impairment,only the undiscounted cash flows of an individual reporting unit will be considered.

Question

Quizplus · Accepted Answer

According to the statement, Jakobe Company acquires multiple companies and expands its operations. Therefore, it has multiple operating segments, and the goodwill within those segments can be netted. However, since the goodwill exists in different operating segments, it cannot be offset. Hence, option C is the correct answer. Option A is incorrect because it suggests netting all goodwill at the reporting level, which may not provide an accurate picture of the individual subsidiaries. Option B is incorrect because it is a random selection basis rather than a systematic approach. Option D is incorrect because goodwill is an essential factor in evaluating impairment.

Jakobe Company Acquires an Average of Two Companies Per Year