Question: The main difference between the impairment tests for goodwill and PP&E under U . S . GAAP is that the goodwill impairment test is a

The main difference between the impairment tests for goodwill and PP&E under U

.

.

GAAP is that the goodwill impairment test is a two

-

step test, while the PP&E impairment test is a one

-

step test. In the first step of the goodwill impairment test, an analyst must compare the fair value of the reporting unit to its carrying amount. If the fair value is less than the carrying amount, then the second step of the test is performed. In the second step, an analyst must estimate the fair value of the individual assets and liabilities of the reporting unit. If the sum of the fair values of the individual assets and liabilities is less than the carrying amount of the reporting unit, then an impairment loss is recognized.

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