Goodwill Impairment

Executive Summary

Goodwill impairment reporting in Canada and U.S. is similar except for the reporting of negative goodwill and the processes that take place to calculate the goodwill.

The impact of amortization of goodwill versus its write-off can be shown by comparing them to each other and by showing how useful they are to investors. Goodwill amortization smoothes the earnings of the entities whereas write-off lower the income and increase the expenses. There are two-step processes that we use to calculate goodwill. We use only one step when there is no impairment but we use two-steps processes when impairment occurs in the first step.

There are many challenges in applying the impairment test. They are caused by companies taking advantage of this reporting, comparability between companies and its high costs and time consuming.�

Comparison of Canada, US, and International Standard

In July 2001accounting for goodwill in Canada and U.S.

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took a significant step with elimination of goodwill amortization and goodwill will be reviewed at least annually for impairment. The major difference between Canada, US, and IAS is accounting treatment for negative goodwill. Both Canada and US adopt same accounting standards regarding to this issue.

Accounting for Negative Goodwill

Under SFAS141 the excess of acquire's interest in the net fair value of acquiree's identifiable assets, liabilities and contigngent liabilities over cost is accounted for by reducing the carrying amounts of certain non-monetary assets and liabilities proportinatedly having completed this exercise any remaining discount is taken to the profit and loss statement as an extraordinary gain, The carrying amounts of the following types of assets are not adjusted in this accounting entry.

Financial assets ( other than investments accounted for using the equity method)

Assets acquired with the intention of near term disposal

Deferred taxes

Pre-paid pension assets, and

Other current...