WGU D252 Task 2 |Passed on First Attempt
|Latest Update with Complete Solution
Goodwill Impairment
Western Governors University
D252
May 21, 2025
Goodwill Impairment D252 Task 2
Today’s corporate environment makes it extremely important to understand goodwill impairment while
efficiently managing the situation for financial reporting to allow for investor confidence. This
comprehensive analysis on AMMRC Inc., a US manufacturer of greenhouses, following the acquisition of
TLTJ & DJJS Co., provides an in-depth look at specific components of goodwill impairment following
the FASB Accounting Standards Codification ASC 350.
AMMRC Inc. is a manufacturer of greenhouses and has acquired TLTJ, a manufacturer of polycarbonate
sheets & panels, and acquired DJJS Co., a manufacturer of heavy-duty greenhouse shelves. When a
company has similar economic characteristics across its reporting units, ASC 350-20-35-35 to ASC 350-
20-35-36 states that these units can be aggregated into a single unit for reporting (FASB, ASC 350-20-35-
35, FASB, ASC 350-30-35-36). If a company has diverse economic characteristics, it should be reported
as a separate unit. Previously, AMMRC Inc. purchased shelves from a foreign company and experienced
unreliable vendor services and shipment of the product from the company, with the product arriving two
or more weeks past the promised delivery date. DJJS’s polycarbonate sheets and panels are used in the
construction of AMMRC Inc.’s greenhouses. TLTJ modified a line of its shelves to fit AMMRC Inc.’s
greenhouses. With TLTJ and DJJS Co.’s having similar economic characteristics due to their market and
the relatability of a product that is already used or can be used within AMMRC Inc.’s greenhouse
productions, a new segment, greenhouse parts & accessories, has been created by this acquisition for
financial reporting purposes. These products can also be sold to other manufacturing companies and to
individual consumers. They will be classified as having similar economic characteristics based on the
items the companies produce for AMMRC greenhouses and customers.
Goodwill is considered any amount over the fair value of the assets (FASB, ASC 350-20-25). Total
goodwill recorded is $1,850,000. Of this amount, TLTJ’s amount related to goodwill is $1,300,000, and
DJJS’s amount related to goodwill is $550,000. The appraised values were $11,000,000 for TLTJ and
$1,800,000 for DJJS. AMMRC Inc. has stipulated that all reporting units must conduct formal
quantitative impairment tests every 5 years, starting from fiscal year 2021. Prior to 2021, AMMRC Inc.
concluded each year that a formal quantitative goodwill impairment test was not required. Several of their
fixed-asset groupings experienced significant declines within the greenhouse parts & accessories segment,
|Latest Update with Complete Solution
Goodwill Impairment
Western Governors University
D252
May 21, 2025
Goodwill Impairment D252 Task 2
Today’s corporate environment makes it extremely important to understand goodwill impairment while
efficiently managing the situation for financial reporting to allow for investor confidence. This
comprehensive analysis on AMMRC Inc., a US manufacturer of greenhouses, following the acquisition of
TLTJ & DJJS Co., provides an in-depth look at specific components of goodwill impairment following
the FASB Accounting Standards Codification ASC 350.
AMMRC Inc. is a manufacturer of greenhouses and has acquired TLTJ, a manufacturer of polycarbonate
sheets & panels, and acquired DJJS Co., a manufacturer of heavy-duty greenhouse shelves. When a
company has similar economic characteristics across its reporting units, ASC 350-20-35-35 to ASC 350-
20-35-36 states that these units can be aggregated into a single unit for reporting (FASB, ASC 350-20-35-
35, FASB, ASC 350-30-35-36). If a company has diverse economic characteristics, it should be reported
as a separate unit. Previously, AMMRC Inc. purchased shelves from a foreign company and experienced
unreliable vendor services and shipment of the product from the company, with the product arriving two
or more weeks past the promised delivery date. DJJS’s polycarbonate sheets and panels are used in the
construction of AMMRC Inc.’s greenhouses. TLTJ modified a line of its shelves to fit AMMRC Inc.’s
greenhouses. With TLTJ and DJJS Co.’s having similar economic characteristics due to their market and
the relatability of a product that is already used or can be used within AMMRC Inc.’s greenhouse
productions, a new segment, greenhouse parts & accessories, has been created by this acquisition for
financial reporting purposes. These products can also be sold to other manufacturing companies and to
individual consumers. They will be classified as having similar economic characteristics based on the
items the companies produce for AMMRC greenhouses and customers.
Goodwill is considered any amount over the fair value of the assets (FASB, ASC 350-20-25). Total
goodwill recorded is $1,850,000. Of this amount, TLTJ’s amount related to goodwill is $1,300,000, and
DJJS’s amount related to goodwill is $550,000. The appraised values were $11,000,000 for TLTJ and
$1,800,000 for DJJS. AMMRC Inc. has stipulated that all reporting units must conduct formal
quantitative impairment tests every 5 years, starting from fiscal year 2021. Prior to 2021, AMMRC Inc.
concluded each year that a formal quantitative goodwill impairment test was not required. Several of their
fixed-asset groupings experienced significant declines within the greenhouse parts & accessories segment,
