Accounting standards continually evolve. One area where significant change has occurred over the past decade is in recording and accounting for goodwill. Prior to 2002, companies were required to amortize goodwill over its useful life, not to exceed 17 years. Beginning in 2002, goodwill was no longer required to be amortized. One company that has been affected by the changes in accounting for goodwill is Curtiss-Wright.
Required
a. By what amounts did Curtiss-Wright's goodwill increase in 2001 and 2002, and what amounts did the company report at December 31, 2001 and 2002? What percentage of Curtis-Wright's total assets does goodwill represent at December 31, 2002? How does this compare to other companies?
b. What is the fair-value amount of assets Curtiss-Wright acquired in 2006 through business combinations? By what dollar amount did goodwill increase during 2006? What percentage increase does this represent? What percentage of Curtiss-Wright's total assets does goodwill represent at December 31, 2006?
c. What amount of goodwill impairment losses did Curtiss-Wright recognize for 2006 and 2005? What change did Curtiss-Wright make during 2006 in its goodwill impairment testing? Why was this change made? What effect did this change have on the financial statements for 2006 and prior years?
d. Do you think the management of Curtiss-Wright prefers the treatment that was required for goodwill before 2002 or the current treatment? Explain.