Goodwill Impairment Analysis: GAAP, IFRS, and Corporate Practices

This report provides a detailed analysis of goodwill impairment, comparing and contrasting the Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). It explores the key differences in valuation methodologies and the challenges these differences pose for company management. The report examines the treatment of goodwill during and after various financial events, including mergers and acquisitions, transfers, and bankruptcies. It also investigates how companies balance goodwill in their financial statements, considering the specific requirements of GAAP and IFRS regarding balance sheets and income statements. Furthermore, the report includes case studies of companies like PwC and General Electric (GE), illustrating their approaches to managing goodwill impairment and navigating the complexities of accounting standards. The references include several research papers and studies that further support the analysis of goodwill impairment.

Goodwill Impairment
REPORT

Question 1:
 GAAP and IFRSF are
able to create the
disparities with the
goodwill that is
viewed at the
impaired level where
the United states and
the other countries
are able to handle the
varying applications of
the valuation
methodologies.

GAAP & IFRS
 The differences are challenging for the management of companies,
where US GAAP, IFRS and the other reporting frameworks need to be
addressed. The goodwill impairment treatment flow mainly from the
fundamental differences in the accounting approaches. IFRS is about
the conceptual basis for the accountants to follow the fair value and
asset recovering aspect.

Difference in
GAAP & IFRS
 US GAAP is about
dictating the goodwill
which is for the
impairment through
use of the fair value
tests with level of
impairment. The step 2
is for the analysis of
related asset values.
Here, FASB is for the
issuance of step zero
qualitative assessment
where the introduction
of principle based
approach is done under
US GAAP.

Differences
 IFRS is about how the investors are reacting to the inconsistent
financial information, where the company management need to
understand about the environment. The differences address effect and
the transaction. Here, IFRS is recently working with European nations
on the different values which are not in original accounting work.

Question 2: Goodwill during and
after financial events
 The goodwill impairment is for the earnings charged with company
records on the income statements. They are mainly for identifying the
asset that is associated to the goodwill. Here, there are no longer
demonstration of the financial results as many companies work on
acquiring other firms and then pay a price exceeding the fair value for
the identifiable asset and liabilities.

Goodwill during and after mergers &
acquisition
 The company is acquired with the target company
where the value arises when there are
acquisitions and the acquirer tend to purchase
target companies. The amount that has been paid
is for the target company over the book value
targets that accounts to the values of a goodwill.

Goodwill during and after transfers
 The goodwill requires to handle the assigner transfer with proper rights
that are related to the rights and the values related to the trademark.
They are authority for the transferee to control and handle the selling
or improvise the changes or the quality or structure. The specific
products are transferred with use of trademark for specific products and
services.

Goodwill during and after
bankruptcies
 They are considered for the goodwill industries of Toronto, Eastern,
Central Areas who have resigned with bankruptcy process moving for
the non-profitable group standards.

Question 3: companies balance
goodwill between GAAP and IFRS
differences.
 GAAP focus on the comparative financial statements which are
presented in different circumstances. The companies follow the SEC
Rules which require the balance sheets for the recent years where the
other statements need to cover the 3 year period which is ended on
balance sheet.
 IFRS is about the information which needs to be disclosed with respect
to the period that is for amounts for current financial statements.
There is a need to match the changes with GAAP allowing the changes in
shareholder equity to be presented in notes to financial statement.

Companies balance goodwill
 The layout for the balance sheet and the income statement of US GAPP
enhances the preparation with accordance to specific layout. Here, the
companies follow detailed requirements that are in regulation to SX
(Lessambo, 2018).
 The IFRS is not for the layout of balance sheet but holds minimum line
items.

Continuation
 The balance sheet is for the debt in GAAP that are considered covenant
violation as non-current, where the lender agreements are for waiving
the rights to demand repayment.
 In IFRS, the debt is mainly through the covenant violations that are set
current unless there are lender agreements which

Continuation
 US GAAP needs to focus on income statements where there are no
general requirements set with GAAP to classify the income statements.
Here, the functions require to handle the charges of restricting,
shipping and handling costs. The SEC registrants are mainly for cost of
sales.
 The IFRS is for the entities which are presenting expenses which are
depending upon the salaries and depreciation values.

Question 4:
 The company like PwC is considered to be effectively able to maintain a
balance for the assets and the liabilities arising from the contingences.
GAAP guidance is about the liabilities and assets that are subjected to
the contractual contingences (Malone, Tarca & Wee, 2016). The
recognition of liabilities subject to other factors. Here, the impact is
mainly for the IFRS guidelines which highlight on the acquisition data.
IAS 39 measures at a higher amount which is for considering the best
amount for setting under IAS 37.

Handling the employee benefit
 There are arrangements and the deferred taxes that needs to be
measured with shared based payments. The applications are related to
work on the fair value and the changes that are recognized through the
earnings or the comprehensive income.
 GAAP is to measure the fair value with changes related to
classifications of assets and liabilities.

Continuation
 The standards require the stakes in entities which are re-measured at a
fair value. The standards are set through matching the investment
basis which includes details to carry out re-measurements. The
standards are clarified with circumstances for the shared based
payments with handling post acquisition charges that are modelling
properly (Ricketts, Riley & Shortridge, 2018).

Continuation
 Full Goodwill highlights about business combination for non-controlling
interest with subsidiary that is under the choice. Here, the acquirer
might either recognize about the non-controlling interest at fair value
which could lead to 100% of the good which is being recognized. The
intangible assets are claimed to future benefits which does not have a
physical or the financial embodiment for the cost savings. The goodwill
is considered important for the intangible assets with handling
combination of business.

Question 5:
 GE works on handling 22% of the total assets which are under the
goodwill and is considered to be handling the GAAP as well. The
intangible assets are recorded when the buyer purchase company. The
fair value of the tangible assets with liabilities require to handle the
payments for and record goodwill which is common (Giloz, Gavious &
Lev, 2014). The accounting risks needs to be hedged with the
companies handling the net investments in a subsidiary.

Continuation
 GE and the companies need to handle the goodwill where there is a
need to determine the change in value. GE per GAAP is for the other
business where the processes are considered for impairment. This does
not amortize the goodwill but the tests are for the least annual
impairment at a business segment level. Some of the firms are
experiencing the distribution for the demotivated assets and liabilities.

Continuation
 There is a need to focus on the currency transaction risks that occurs
when the company has a domination in foreign standards. The gains
and losses are reconsider through the payments that are made or when
there is intervening of balance sheet date (Patil, Kenjale & Kanade,
2017). There are exhibits to provide a transaction and translation for
gain and loss effects of US dollar that is strengthening and weakening.

Continuation
 The risks need to be determined with handling accounting risks that
might be hedged. Here, the price allocation is based on handling the
fair values where the adjustments need to reflect on the differences
between IFRS and GAAP that requires to handle the amount of assets
and the liabilities that are assumed as on the acquisition date.

References
 Lessambo, F. I. (2018). IFRS and GAAP. In Financial Statements (pp. 299-324).
Palgrave Macmillan, Cham.
 Malone, L., Tarca, A., & Wee, M. (2016). IFRS non‐GAAP earnings disclosures
and fair value measurement. Accounting & Finance, 56(1), 59-97.
 Ricketts, R. C., Riley, M. E., & Shortridge, R. T. (2018). Information content of
IFRS versus GAAP financial statements. Journal of Financial Reporting and
Accounting, 16(1), 120-137.
 Giloz-Ran, E., Gavious, I., & Lev, B. (2014). The Positive Externalities of IFRS:
Enhanced R&D Disclosure.
 Patil, A., Kenjale, P., & Kanade, A. (2017). IFRS Impact on Profitability and
Liquidity Parameters for the Indian IT Sector-Case Study Approach.