D252
Accounting Research & Critical Thinking
TASK 2
Goodwill Impairment Analysis
Passed on the First Attempt.
Western Governors University
, Goodwill Impairment Page 2 of 14
Standards for Similar Economic Characteristics
To determine whether two operating segments should be combined into one operating
segment, some qualitative factors will be analyzed, and the segments must be similar in all the
following: Some operating segments will have similar financial performance when they have
similar economic characteristics.
Typically, when operating segments have similarities in financial performance, like cash
flows and profit margins, this could mean they have similar economic characteristics. This also
requires the entity to determine whether the two operating segments should be aggregated into
one reporting unit. Determining when or if the two operating segments should be combined into
one reporting unit, utilizes a qualitative approach. The similarity analysis should consider the
following determinants:
The products and services offered
The production processes
The customer base for their products and services, namely class and type
The regulatory environment, if applicable such as banking, insurance, or public
utilities (FASB, ASC 280-10-50-11).
Although the above similarities should be taken into consideration, those alone do not
necessarily determine when economic similarities require two segments to be reported as one
unit. How an entity manages operations and how an acquired entity is integrated are key factors
in determining the reporting units within an entity (FASB, ASC 350-20-55-1).
The purpose is to provide information about the different business activities and the
different economic environment in which the entity operates to help financial statement users
Accounting Research & Critical Thinking
TASK 2
Goodwill Impairment Analysis
Passed on the First Attempt.
Western Governors University
, Goodwill Impairment Page 2 of 14
Standards for Similar Economic Characteristics
To determine whether two operating segments should be combined into one operating
segment, some qualitative factors will be analyzed, and the segments must be similar in all the
following: Some operating segments will have similar financial performance when they have
similar economic characteristics.
Typically, when operating segments have similarities in financial performance, like cash
flows and profit margins, this could mean they have similar economic characteristics. This also
requires the entity to determine whether the two operating segments should be aggregated into
one reporting unit. Determining when or if the two operating segments should be combined into
one reporting unit, utilizes a qualitative approach. The similarity analysis should consider the
following determinants:
The products and services offered
The production processes
The customer base for their products and services, namely class and type
The regulatory environment, if applicable such as banking, insurance, or public
utilities (FASB, ASC 280-10-50-11).
Although the above similarities should be taken into consideration, those alone do not
necessarily determine when economic similarities require two segments to be reported as one
unit. How an entity manages operations and how an acquired entity is integrated are key factors
in determining the reporting units within an entity (FASB, ASC 350-20-55-1).
The purpose is to provide information about the different business activities and the
different economic environment in which the entity operates to help financial statement users
