EY’s analysis of the accounts of 16 European utilities reveals that almost €17.7 billion (US$23.4 billion) was written off balance sheets between 2010 and 2011. A large proportion (58 per cent) of this lost value is concentrated among just three utilities, while only four companies posted impairments of €150 million (US$198 million) or less.
Mergers and acquisitions activity may have left some companies lamenting costly acquisitions, notably those in Southern Europe. Deals concluded at high prices have failed to deliver promised value in the current economic climate, leading to impairments to goodwill. Assets, meanwhile, account for the largest share of lost value, with almost €13.6 billion (US$18 billion) written off between 2010 and 2011.

Required
a. Discuss when entities can recognise goodwill on the balance sheet.
b. Once recognised, explain the annual reporting requirements for goodwill.
c. Explain the factors that would have contributed to European utilities’ impairment of goodwill.