1. Murthy wondered whether some biases had unconsciously crept into the decision of Teladoc's management to write down $6.6 billion of goodwill. Appendix 1 of the case lists common managerial biases. Identify two specific biases that might have influenced the magnitude and the timing of the goodwill impairment decision. Please make sure that you support your answer with specific case facts

Professional judgment in accounting settings is required in situations where there are no definitive answers. Judgment is an inherently subjective process, and it is important to recognize that conscious or unconscious biases can affect professional judgment. The biases listed below illustrate the potential biases to be aware of when exercising professional judgment. This is not an exhaustive list. Rather, it is an illustrative list of potential biases identified by prior research that all professionals should be aware of when exercising judgment in uncertain situations.

 

Anchoring bias: The tendency to use an initial piece of information as an anchor against which subsequent information is inadequately assessed.

Automation bias: The tendency to favor output generated from automated systems, even when human reasoning or contradictory information raises questions as to whether such output is reliable or fit for purpose.

Availability bias: The tendency to place more weight on events or experiences that immediately come to mind or are readily available than on those that are not.

Confirmation bias: The tendency to place more weight on information that corroborates an existing belief than information that contradicts or casts doubt on that belief.

Groupthink: The tendency for a group of individuals to discourage individual creativity and responsibility and as a result, reach a decision without critical reasoning or consideration of alternatives.

Overconfidence bias: The tendency to overestimate one's own ability to make accurate assessments of risk or other judgments or decisions.

Representation bias: The tendency to base an understanding on a pattern of experiences, events or beliefs that is assumed to be representative.

Selective perception: The tendency for a person's expectations to influence how the person views a particular matter or person.