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SKM1 — SKM1 TASK 2: GOODWILL IMPAIRMENT ACCOUNTING RESEARCH AND CRITICAL THINKING — D252 PRFA — SKM1 COMPETENCIES 3108

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SKM1 — SKM1 TASK 2: GOODWILL IMPAIRMENT
ACCOUNTING RESEARCH AND CRITICAL THINKING — D252
PRFA — SKM1

COMPETENCIES
3108.1.1: Explains Sources of Professional Research in Accounting
The learner explains primary and secondary sources of professional research as used in the accounting field.
3108.1.2: Applies Critical Thinking and Writing Skills in Accounting Research
The learner applies critical thinking and effective writing skills for the professional accountant.
3108.1.3: Researches Accounting Issues Utilizing Public Databases
The learner researches financial accounting issues with appropriate tools, including research question development, source validation, and sorted and
validated data from public databases.

INTRODUCTION
This task helps prepare you to conduct efficient research, think critically, and provide effective communication in an accounting and auditing situation. FASB
Topic 350 - Intangibles - Goodwill and Other will be used for the research element of the task. Due to the number of updates to Topic 350 over the years,
you should utilize the “FASB Accounting Standards Codification Database” (see Web Links section) for your research. In part A you will research FASB Topic
350 generally, based on the details provided in each subprompt. Then in part B you will apply your research based on the details in the Scenario and
supporting document “Goodwill Impairment Data.”
You are an auditor with a local CPA firm. You have been tasked with researching the treatment for goodwill impairment for AMMRC Incorporated (AMMRC
Inc.), one of the firm’s clients. AMMRC Inc. purchased 100% of two U.S. corporations. AMMRC Inc. decided to complete quantitative impairment tests of
goodwill for year-end December 31, 2021. You will review the scenario and appendix, research the general process of assessing goodwill impairment from
FASB Codification Topic 350, and appropriate subtopics, sections, and subsections. You will provide a decision path, justify your course of action, and
calculate impairment loss (if required).

SCENARIO
AMMRC Incorporated (AMMRC Inc.), is a U.S. manufacturer of greenhouses. AMMRC Inc. sells the greenhouses online through its website.
On January 1, 2016, AMMRC Inc. purchased 100% of TLTJ (TL), a U.S. corporation located throughout the U.S. as well as DJJS Company (DJ), a U.S. closely
held corporation located on the West Coast. AMMRC Inc. originally recorded $1,850,000 of goodwill on its consolidated balance sheet, with $1,300,000 and
$550,000 related to TL and DJ, respectively.
The New Segment
TL manufactures polycarbonate sheets and panels. The sheets and panels have great transparency and are virtually unbreakable. The sheets and panels are
used in construction of AMMRC Inc’s greenhouses and are sold through its website to other manufacturing companies and to individual consumers. DJ
manufactures heavy-duty greenhouse shelves. A line of its shelves was modified to fit AMMRC Inc.'s greenhouses. DJ also manufactures shelves that are sold
to other manufacturing companies and to individual consumers.
Before purchasing DJ, AMMRC Inc. purchased the shelves from a foreign company. AMMRC Inc. experienced unreliable vendor services and shipment of the
product from the foreign company; the product usually arrived two or more weeks past the promised delivery date. Upon the purchase of TL and DJ,
AMMERC Inc. formally established a new segment, Greenhouse Parts and Accessories, for financial reporting purposes.
Goodwill
AMMRC Inc. developed a policy that requires all reporting units to formal quantitative impairment tests of goodwill every five years, beginning with the
financial statements for fiscal year 2021. Prior to 2021, AMMRC Inc. concluded each year that a formal quantitative goodwill impairment test was not
required.
AMMRC Inc. prepared to test all of it reporting units. In conjunction with these tests, AMMRC Inc. noted that several fixed-asset groupings within
Greenhouse Parts and Accessories experienced significant declines in market value, and thus the segment personnel would be testing all fixed-asset
groupings for impairment. AMMRC Inc. hired a large consulting firm that specialized in corporate valuation to conduct appraisals that are necessary for the
goodwill impairment testing process. Its appraisal reports highlighted December 31, 2021, fair values in the amounts of $11,000,000 and $1,800,000 for TL
and DJ, respectively. AMMRC Inc. is confident that all of the other assets and liabilities were reported at appropriate amounts that approximated fair values.
Additional information for impairment testing is found in the attached “Goodwill Impairment Data.”

REQUIREMENTS

Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual
source can be directly quoted or closely paraphrased from sources, even if cited correctly. The similarity report that is provided when you submit your task
can be used as a guide.

You must use the rubric to direct the creation of your submission because it provides detailed criteria that will be used to evaluate your work. Each
requirement below may be evaluated by more than one rubric aspect. The rubric aspect titles may contain hyperlinks to relevant portions of the course.
Tasks may not be submitted as cloud links, such as links to Google Docs, Google Slides, OneDrive, etc., unless specified in the task requirements. All other
submissions must be file types that are uploaded and submitted as attachments (e.g., .docx, .pdf .ppt).

A. Research the FASB Accounting Standards Codification Topic 350 (ASC 350) standards for goodwill impairment using the “FASB Accounting Standards
Codification Database” web link, then summarize the relevant ASC 350 standards and components (including topic, subtopic(s), section(s), and
subsection(s)) to do the following:

1. Describe the treatment for when a company has similar economic characteristics.

2. Describe the treatment for when a company does not have similar economic characteristics.
3. Describe the treatment for a public company.

4. Describe the treatment for a private company.

5. Describe the treatment for when a company elects the accounting alternative.

6. Describe the treatment for when a company does not elect the accounting alternative.

7. Describe the treatment for when a company has a triggering event occur.

8. Describe the treatment for when a company does not have a triggering event occur.

B. Using the scenario, the attached “Goodwill Impairment Data,’ and the research completed for part A, determine the best approach for AMMRC Inc’s

treatment of goodwill impairment while justifying your decision on each of the following decision points:
e whether the company has similar economic characteristics
e whether the company is public or private
e whether the company elects the accounting alternative
e whether the company has a triggering event occur
1. Determine the goodwill impairment loss, if required, for TL and DJ corporations based on the information provided in the attached “Goodwill
Impairment Data” and appropriate authoritative guidance (ASC 350). If goodwill impairment loss is not required, explain why.
C. Acknowledge sources, using APA-formatted in-text citations and references, for content that is quoted, paraphrased, or summarized.
D. Demonstrate professional communication in the content and presentation of your submission.
File Restrictions
File name may contain only letters, numbers, spaces, and these symbols: !-_.*'()
File size limit: 200 MB
File types allowed: doc, docx, rtf, xls, xlsx, ppt, pptx, odt, pdf, txt, qt, mov, mpg, avi, mp3, wav, mp4, wma, flv, asf, mpeg, wmv, m4v, svg, tif, tiff, jpeg, jpg, gif, png, zip, rar,
tar, 7Z
RUBRIC
A1:ASC STANDARDS FOR SIMILAR ECONOMIC CHARACTERISTICS
NOT EVIDENT APPROACHING COMPETENCE COMPETENT
A description for the ASC 350 treatment when a The submission describes the treatment for The submission accurately describes the treat-
company has similar economic characteristics is when a company has similar economic charac- ment for when a company has similar economic
not provided. teristics, but the description is not accurate or characteristics, including a logical summary of
does not include a logical summary of 1 or more the relevant ASC 350 standards and the given
of the relevant ASC 350 standards or the given components.
components.
A2:ASC STANDARDS FOR DISSIMILAR ECONOMIC CHARACTERISTICS
NOT EVIDENT APPROACHING COMPETENCE COMPETENT
A description for the ASC 350 treatment when a The submission describes the treatment for The submission accurately describes the treat-
company does not have similar economic char- when a company does not have similar economic ment for when a company does not have similar
acteristics is not provided. characteristics, but the description is not accu- economic characteristics, including a logical sum-
rate or does not include a logical summary of 1 mary of the relevant ASC 350 standards and the
or more of the relevant ASC 350 standards or given components.
the given components.