Basic Understanding of Goodwill Impairment Analysis

Goodwill arises when a company acquires another company and the purchase price associated with that acquisition exceeds the value of the hard assets. So, each year after the transaction, companies need to go through an exercise to evaluate that goodwill. The FASB (Financial Accounting Standards Board) is the apex regulatory body that sets ASC (Accounting Standards Codification for non governmental entities. ASC 350 clearly specifies that goodwill and other intangible assets need to be tested for impairment from time-to-time.

Mergers and acquisitions are increasing these days and it is becoming increasingly important that companies do their goodwill assessments at the right time. The ASC 350 demands that companies have to do an annual assessment of their goodwill and they should mark down the carrying value of the goodwill if there is any impairment. There are basically two stages for the identification and the assessment of goodwill impairment.

These stages are generally conducted at reporting unit levels. In the first step, the assumption made is that goodwill is not impaired because the fair value of reporting unit is greater than the carrying value. In the second step, fair value is allocated to all liabilities and assets of the reporting unit. Impairment is then calculated as the difference between the carrying value and observed fair value.

Who does the goodwill impairment analysis? What expertise is needed to carry out this analysis? How much time does it take for this analysis? These are some answers that stakeholders are seeking in today’s business world. Goodwill impairment analysis is generally done by consulting companies because only such companies have the ability to capture key metrics accurately and in a clear manner. The business valuation teams generally comprise veteran patent lawyers who are completely equipped to assist clients in the goodwill impairment testing processes.

Sadly, there are quite a few companies who are totally unaware of goodwill impairment procedures and they tend to do things the wrong way. Here is an example that will simplify the concept of goodwill impairment. Say Coca Cola bought Pepsi for 60 billion with goodwill of 58 billion. This goodwill is put in the balance sheet of Coca Cola and it stays there. Now, two years down the line, Pepsi sinks in value from 60 billion to two billion, what will happen to the goodwill on the balance sheet of Coca Cola? Is it still valid? The answer is no. Goodwill is the asset that is dependent on the yield of the fair value of the previously acquired asset when it still exceeds its book value. So, if the excess at the time of acquisition was 58 billion, and the current excess is only 20 billion, that Coca Cola has to impair by 38 billion.

If you have not understood this concept even with the aforementioned example, you should not be worried at all. There are thousands of goodwill impairment analysts who can do the analysis for you and submit a complete report of what is currently happening. They will also provide you with the future course of action.

The Advantages of Savings Accounts

The 2014 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling revealed that 66 percent of adults keep non-retirement savings. However, the same survey revealed 16 percent of adults worry about their emergency cash stash and having enough money for retirement.

Merely keeping a savings account encourages a new level of financial security. Here are three financial advantages to maintaining a savings account.

1. Creates the Habit

The existence of a savings account alone can help create a saving habit. Banks will often make it easy with low opening balances and waive maintenance fees if you keep the balance at a certain level. With basic accounts, this required minimum balance to avoid fees can be as low as $100—an amount easy to maintain.

The habit is essential to maintaining this element of financial security. Even though people are starting to save more, 44 percent of households are considered liquid asset poor, meaning they hold less than three months' expenses worth of savings. Having some nebulous definition of an acceptable checking account balance or even just stuffing cash into a mattress does not promote the same financial awareness as seeing your savings balance alongside your checking balance every time to perform online banking.

2. Automatic Deposits

You do not have to rely on self discipline alone. Just as you can arrange direct deposit into your checking account, you can have part of your paycheck go into savings too. Making this automatic means the money hits your account before you have a chance to fail in the delayed gratification department.

If your employer cannot split your check that way, you can arrange for automatic transfers between your checking and savings account. If you have trouble saving money, automation may be an effective tool for you.

3. Access in Case of Emergency

It is often argued that savings accounts need to be difficult to access. Unfortunately, if you are stranded at a car repair shop out of town and need funds quick, this barrier to enforce self discipline may leave you stuck longer.

Since an emergency fund offers no benefits unless it is accessible, place that money in a general savings account that allows quick money transfers when challenging circumstances arise. You can still control your access by implementing two ground rules:

• Decide on a specific definition of an emergency. Limit the use of the funds to truly challenging events like a leaking roof or a broken down car. Wanting pizza for dinner one night is not an emergency.

•  See the minimum amount to avoid fees as an advantage. Knowing that you must keep $100 in savings or face a $3.00 a month fee means a reduced likelihood of spending down savings for frivolous reasons.

 Savings accounts are a great start to developing good financial habits. With the many options available, it is easy to find the best account to suit your needs.

5 ways to maximize your retirement fund

If you’ve recently made the decision to retire, it can often seem scary thinking that your incoming salary has suddenly stopped. But ending your career doesn’t have to mean that the money stops rolling in altogether, there are plenty of easy ways for you to maximise your pension pot.

Get a part-time job

Many people find the transition from full-time employment to retirement difficult to make. For years you have centred your entire life around your job so it can be strange suddenly not having a place to be at a certain time. Now, we aren't suggesting that you jump straight back into full-time work, but instead consider getting a part-time job. Working for a couple of days a week can make a significant difference to your finances and keeping busy can help to improve your well being.

Turn your hobby into a business

Do you have a passion that you could turn into a lucrative business? Your hobby could bring in some extra income. Whether you are a master craftsman, a skilled baker or a dab hand at gardening, consider whether you could sell this as a commodity. If you are brimming with ideas but lacking the funds needed to begin your project, you could always cash in your pension early, freeing up some extra funds to bankroll your business.

Get comping!

Nowadays, companies are constantly vying for our attention. This means that everyday there are thousands of fantastic prizes to be won through entering competitions. Nearly all of them are free to enter, all it takes is time and patience to fill the details in. You never know until you try, you could win a brand new TV, a car or even a holiday!

Sell things on eBay

By the time you reach retirement age you will have gathered a whole mountain of possessions. While some of these hold sentimental value, many of them are probably useless to you and are merely collecting dust in your attic. Turn those dust monsters into dollars by selling your unwanted items on sites such as eBay. One man’s trash is another man’s treasure, after all.

Tutor somebody

They say that knowledge is power, but it could also be the key to increasing your retirement fund. Sell your skills by tutoring local children or young adults. You don’t have to be an expert, simply brush up on your math and English skills, or perhaps you could teach somebody how to play a musical instrument.