Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has...

 

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Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impaimment testing. The objective of the impairment test is to ensure that reported goodwill does not have carrying amount in excess of its recoverable amount. Nevertheless, many critics suggest that the new method may allow managements to engage in opportunistic eamings manipulation activities (Al-Hiyari, A., Abdul Latif, R. &Amran, N.A. 2016, p. 69). Required: a. Evaluate the shortcomings that arise following the adoption of the impairment-only approach to accounting for acquired goodwill. [12 marks] b. Analyse at least two (2) solutions that have been proposed to address the shortcomings in the application of an impairment model. [8 marks] Following the adoption of International Financial Reporting Standards (IFRS) in Malaysia, the accounting for goodwill has changed from systematic amortisation to a method based solely on periodic impaimment testing. The objective of the impairment test is to ensure that reported goodwill does not have carrying amount in excess of its recoverable amount. Nevertheless, many critics suggest that the new method may allow managements to engage in opportunistic eamings manipulation activities (Al-Hiyari, A., Abdul Latif, R. &Amran, N.A. 2016, p. 69). Required: a. Evaluate the shortcomings that arise following the adoption of the impairment-only approach to accounting for acquired goodwill. [12 marks] b. Analyse at least two (2) solutions that have been proposed to address the shortcomings in the application of an impairment model. [8 marks]

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Concerns Raised by Stakeholders Regarding an ImpairmentOnly Approach From the review two interrelated issues seem to dominate the discussion on an impairmentonly approach to acquired goodwill First th... View the full answer