Business combinations
Area 2: Technical Accounting and Reporting (35-45%)
Your Progress
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Topics
- Acquisition method (ASC 805)
- Goodwill and bargain purchase gains
Study Frameworks
Goodwill Impairment Test (ASC 350)
Optional: Does a qualitative assessment indicate it is more likely than not (>50%) that FV < carrying amount?
Yes
Quantitative test: Is the fair value of the reporting unit less than its carrying amount (including goodwill)?
Yes
Impairment loss = Carrying amount − Fair value (capped at goodwill balance). Never reversed.
No
No impairment — fair value exceeds carrying amount
No
No impairment — qualitative factors do not indicate likely impairment; skip quantitative test
ASC 805 — Identifiable Intangibles in Business Combinations
| Category | Examples | Useful Life |
|---|---|---|
| Marketing-related | Trademarks, trade names, internet domains | Indefinite or finite |
| Customer-related | Customer lists, order backlogs, contracts | Finite |
| Artistic-related | Copyrights, plays, books, photographs | Finite |
| Contract-based | Licenses, franchise agreements, leases, non-competes | Finite |
| Technology-based | Patents, trade secrets, software, databases | Finite |