1. Statement 142 requires goodwill to be tested for impairment at the reporting unit level at least annually using a two-step impairment test. Step 1 of the test is a screen used to identify whether a goodwill impairment may exist. In Step 1, an entity compares the fair value of a reporting unit with its carrying amount. If a reporting unit’s carrying amount exceeds its fair value, a goodwill impairment may exist. Step 2 of the test must then be performed to measure the amount of impairment, if any. In Step 2, an entity compares the implied fair value of goodwill with its carrying amount. An impairment loss is measured by the excess of the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill should be determined in the same manner that goodwill is measured in a business combination under Statement 141(R) (or in an acquisition of a business or nonprofit activity by a not-for-profit entity under Statement 164). That is, an entity must allocate the fair value of a reporting unit to the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination or in an acquisition of a business or Copyright © 2010, Financial Accounting Standards Boar
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