From the course: Accounting Foundations: Asset Impairment
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The new goodwill impairment rule
From the course: Accounting Foundations: Asset Impairment
The new goodwill impairment rule
- When Disney purchased Lucasfilm for over four billion dollars in 2012, Disney was primarily paying for Lucasfilm's goodwill. The amount of goodwill recorded in an acquisition is the extra amount a buying company has to pay for a target company to pay for all of the valuable relationships the target company has built up over the years. For accounting purposes, this goodwill is assumed to have an infinite life. So, goodwill is not amortized but it is tested annually for impairment. When goodwill is recognized in conjunction with the acquisition of a business, that goodwill is assigned to an existing reporting unit of that acquiring business. For example, the Lucasfilm goodwill purchased by Disney was spread across all five of Disney's operating segments, media networks, parks and resorts, studio entertainment, consumer products, and interactive. Most of the Lucasfilm goodwill was assigned to the studio entertainment and…
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