A few years ago, High-Tech Company purchased Roboto Company, recorded goodwill, and assigned...
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Accounting
A few years ago, HighTech Company purchased Roboto Company, recorded goodwill, and assigned Robotos assets and liabilities, including goodwill, to a new reporting unit called the AI reporting unit.
The AI reporting unit has had negative and declining cash flows recently due to increased competition and the loss of some key personnel. HighTechs management suspects that the AI reporting unit may be impaired and wonders whether it should be written down.
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If it is more likely than not that the fair value of the reporting unit is less than its carrying value and the reporting unit has goodwill, then a company needs to perform a goodwill impairment test for the reporting unit. Give at least five events and circumstances that could cause the fair value of a reporting unit to be less than its carrying value. Does it appear that HighTech should perform a goodwill impairment test on its AI reporting unit? Explain.
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