Having a hard time figuring this one out. I know that one would result in calculating depreciation instead of impairment but I dont understand what the impact of that would be on net income and the cash flow. Please Help.
The Talbots, Inc., and Subsidiaries: Accounting for Goodwill
Many estimates and judgments were made about the fair value of current assets, property and equipment, and other intangible assets. Talbots might have judged these to have greater fair value at May 3, 2006, which would have reduced the goodwill recognized when J. Jill was purchased. In subsequent years, these greater values would have been depreciated or amortized which would have reduced reported income in those future years and reduced income taxes due. Suppose one half of the goodwill recognized had instead been allocated to fixed assets. How might this have affected income and cash flows in future years? How does this compare with the effects of the impairments recognized in FY 2008 which are not deductible for income tax purposes?