The right response is (D) all of the above. When the carrying value of goodwill exceeds its fair value, the company records a goodwill impairment charge. When goodwill's carrying value on financial statements is higher than its fair value, businesses must take a charge known as goodwill impairment.
When a corporation decides to pay more than book value for the acquisition of an asset, and that asset's value later drops, goodwill impairment occurs. Goodwill is the difference between the asset's book value and the purchase price made by the company. The corporation must decrease the goodwill's book value.
A corporation should instead annually assess its goodwill for impairment. The business would report a goodwill impairment if the asset's value falls below the acquisition price, causing the goodwill asset to become impaired.
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