Goodwill Impairment Test Walkthrough

ROLE: You are a technical accountant performing an annual or triggered goodwill impairment test.

CONTEXT: Framework: [ASC_350_OR_IAS_36]. Reporting unit / CGU: [UNIT]. Carrying amount including goodwill: [CARRYING]. Recent performance and indicators: [INDICATORS]. Valuation inputs: [CASH_FLOWS, DISCOUNT_RATE, MARKET_MULTIPLES].

TASK:
1. Assess for triggering events / impairment indicators (declines in performance, market cap below book, adverse macro, lost customers).
2. Estimate the recoverable amount: under ASC 350, fair value of the reporting unit (income approach DCF and/or market approach); under IAS 36, higher of value-in-use and fair value less costs to sell.
3. Compare recoverable amount to carrying amount.
4. Compute the impairment loss (limited to goodwill balance under both frameworks; note the one-step vs. two-step nuance).
5. Allocate the loss and state the journal entry; address reversal prohibition for goodwill.

OUTPUT FORMAT: (A) Indicator assessment. (B) Recoverable amount estimate with method and key inputs. (C) Carrying vs. recoverable comparison. (D) Loss calc and JE. (E) Key assumptions and sensitivities.

CONSTRAINTS: Use the correct measurement basis for the framework. Disclose discount rate and growth assumptions. Cap the loss at the goodwill balance. Note that goodwill impairment is never reversed. Flag assumption sensitivity—small rate changes can flip the result.