Goodwill Impairment

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Recommended: Importance of goodwill

March 30, 2017
To: Professor Mark Ingram
From: Dinna Alvarado
Subject: Goodwill and Goodwill Impairment

Purpose: Define goodwill and determine how goodwill would be applied for Union Corporation. Additionally, the annual goodwill impairment test will be conducted for each of Union Corporation’s two reporting units.

Facts and Background: Union Corporation is a producer and provider of hydraulic fracturing equipment for oil and natural gas drilling. On January 4, 2016, Union Corporation bought Subsidiary A and Subsidiary B. The annual goodwill impairment test will be conducted on January 1, 2017.

Accounting Treatment: According to ASC 350.20.20, goodwill is an asset that represents upcoming economic benefits due to a business acquisition. …show more content…

The fair value of identifiable net assets includes four accounts classified under unrecognized intangibles. In order to determine which unrecognized intangibles is included in goodwill, ASC 805.20.55 was consulted. The Customer List had a fair value of $10M and was not included in goodwill. ASC 805-20-55-4 states that customer lists are licensed and can be sold; hence meeting the first criterion of an identifiable asset and not included in goodwill. Assembled Workforce was among the unrecognized intangibles. According to ASC 805-20-55-6, assembled workforce is included goodwill because it does not meet neither of the identifiable asset criterions. Trademark is not included into goodwill due to the fact that it meets the first criteria of an identifiable asset (ASC 805-20-55-17). The Licensing Agreement is a contractual agreement, meeting the second criteria of the identifiable asset; therefore not incorporated into goodwill (ASC 805-20-55-31). Lastly, In-Process Research & Development is not subsumed into goodwill because technology processes can be sold or exchanged; meeting the first criteria of an identifiable asset (ASC

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