1. Evaluate the five general valuation rules discussed at the beginning of the case. Is it useful to have those different valuation methods? Explain.
2. Why are the impairment rules for goodwill different than for other assets? Explain.
3. Evaluate the recoverability test used in U.S. GAAP.
4. Are the differences between IFRS and U.S. GAAP significant? Explain.
5. Compare the three IFRS disclosures in Exhibits 1, 2, and 3. How subjective are the impairment calculations? Which assumptions needed to compute impairment are the most subjective? Which are least subjective? Explain.
6. Compare the two U.S. GAAP disclosures, using the same criteria as in question 5.
7. Which of the five disclosures is most informative? Which is least informative? Why?
8. Which disclosures are most informative, the IFRS disclosures, the U.S. GAAP disclosures, or are the differences more company specific? Explain.
From the time double-entry bookkeeping was developed 700 or 800 years ago until the 1980s, firms reported most assets and liabilities at historical cost. 1 Since the mid- 1980s, accounting rules in the United States and much of the rest of the world gradually moved away from historical cost, toward fair value or some similar measure of current market price.2 Although most rules apply to asset valuations, some also apply to liabilities. Over the years, U.S. GAAP (Generally Accepted Accounting Standards) and IFRS (International Financial Reporting Standards) developed the following valuation methods (differences between IFRS and U. S. GAAP are usually small but are sometimes significant):