XYZ Incorporated,

Your Chief Financial Officer, Mr. Gabriel Isaacs, has come to me with questions about accounting issues related to your firm. In a recent meeting, he was told that he needs to potentially adjust the carrying value of his intangible assets for possible impairments in value. Carrying value must not be overstated or understated because this will cause it to show false amount on the balance sheet which would give misleading information. He was also told that the Goodwill booked on the Balance Sheet is not subject to amortization but must also be adjusted if necessary for possible impairment of value as well. Accounting for goodwill is not the same as accounting for other intangible assets. Unlike other intangible assets, it cannot be amortized. Amortization and depreciation are closely related. There is no lifetime for goodwill and a company can only receive goodwill if they have purchased a company for a premium. They can also develop goodwill with the types of services offered. Goodwill should be tested for impairment. Impairment is when the current carrying value of the amount of goodwill exceeds the implied fair value that is being reported. If the carrying value is overstated, then this will overstate the amount reported in the balance sheet and overstate total assets at the end of the period. With this, total net income will also be overstated meaning that this effects the income statement for that period as well. An impairment on goodwill needs to be reported as a loss on the income statement in the section “Other expenses and losses.” This will then decrease the total assets amount reported in the balance sheet. Because of the Full Disclosure Principle, this needs to be recorded either in the footnotes or the financial statements. Property, plant, and equipment are tangible assets, which means they are physical. These are usually