In 2014, Time Warner, Inc. spun off its wholly owned unit, Time Inc., as an independent, publicly traded company. The spin-off was achieved by distributing new Time Inc. shares to the holders of Time Warner stock. The transaction was not taxable to Time Warner shareholders. Time Inc. is primarily engaged in magazine publishing and related operations. Describing Time Warner's accounting for goodwill, indicates that Time Inc. was one of the reporting units to which goodwill was allocated prior to 2014. Time Warner elected not to perform the qualitative test for goodwill impairment in 2013, but did not recognize any goodwill impairment losses in 2013. In answering the following questions, use the information provided here.

Required

a. Why is goodwill assigned to reporting units? The business application indicates that \($3,162\) million in goodwill was assigned to the Time Inc. unit at December 31, 2013. What transactions and events determine the amount assigned to each reporting unit?

b. In general, how are goodwill impairment losses calculated? Why do you think Time Warner bypassed Step 0 in 2013? Why are no goodwill impairment losses reported in 2013?

c. How did Time Warner report Time Inc. in its consolidated financial statements in its 2013 financial statements? How do you think Time Warner reports its spin-off of Time Inc. in 2014?

d. How would Time Warner’s goodwill impairment testing process change in 2014 as a result of the Time Inc. spin-off?