Lesson: Goodwill Impairment

In this lesson, Nick Palazzolo, CPA, demystifies the concept of goodwill impairment, explaining the process of writing down the value of this intangible asset when it loses value. With an engaging walkthrough, Nick breaks down the two-step approach under U.S. GAAP, consisting of the qualitative and quantitative tests. The discussion includes real-world scenarios such as market downturns and company-specific financial difficulties that can trigger the need for impairment. Additionally, Nick simplifies the assessment process showing how factors like bankruptcy or organizational changes impact the decision to perform a quantitative test. The lesson comes to life with a practical example involving journal entries and step-by-step calculations for hypothetical reporting units, illustrating how to recognize and measure goodwill impairment and the resulting accounting entries.