In 2006, Nelson Communications purchased a controlling interest in Telnetco that resulted in goodwill in the 2006
Question:
In 2006, Nelson Communications purchased a controlling interest in Telnetco that resulted in goodwill in the 2006 consolidated financial statements of $4,500,000.There are no other intangible assets. Telnetco continues to be listed on NASDAQ. Near the end of 2007, Nelson estimated that the fair market value of Telnetco was $50,500,000 based on the present value of its future cash flows. Using the assistance of a professional appraisal firm, it was determined that the fair market value of its net tangible assets was $46,900,000, resulting in a goodwill write-down of $900,000
Required
a. Describe the inherent risks to this write-down.
b. Describe the audit evidence needed to evaluate the fairness of this write-down.
c. How might a specialist be of help?
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
a The inherent risks in this writedown include A minor change in the dis...View the full answer
Auditing a business risk appraoch
ISBN: 978-0324375589
6th Edition
Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston
