Simco's shaving products division was acquired over ten years ago in a purchase transaction by BlizzardCraft.The related goodwill was amortized until 2002 and $4.5 million remained on the books thereafter.In 2008,Simco's production machinery was assessed for impairment as a long-lived asset because of obsolescence issues.What relationship will the auditors most likely make between the facts stated above?
A)BlizzardCraft erroneously treated the acquisition of Simco as a purchase transaction when it should have been a pooling of interests.
B)Simco should not have amortized goodwill previous to 2002.
C)The goodwill related to Simco may have been impaired during 2008.
D)Simco's goodwill should have been written off when purchased by BlizzardCraft in a one-time transaction.

Question

Quizplus · Accepted Answer

The auditors are most likely to make the relationship between the fact that Simco's shaving products division was acquired over ten years ago and its related goodwill was amortized until 2002, with the fact that in 2008, Simco's production machinery was assessed for impairment as a long-lived asset due to obsolescence issues. As a result, the auditors may infer that the goodwill related to Simco could also have been impaired during 2008.

Simco's Shaving Products Division Was Acquired Over Ten Years Ago