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Essay / Research Paper Abstract
A 3 page paper discussing the audit approach for a case in which a company seeks to overstate assets and disguise a loss on discontinued operations. The paper uses FASB Statements No. 141 and 142 to conclude that details need to be disclosed and that the auditor must issue a qualified or adverse opinion if it is not. Bibliography lists 5 sources.
Page Count:
3 pages (~225 words per page)
File: CC6_KSacctGdwl.rtf
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Unformatted sample text from the term paper:
been problematic for companies at least since the 1880s, when two general approaches emerged. Both address goodwill as the "leftover amount" following business combination or acquisition (Johnson, 1993).
Accuracy in financial reporting is paramount in todays environment, however, particularly within the confines of Sarbanes-Oxley. Enron used different mechanisms to put over the same type of deception that
Gulwest has ensconced in its reporting of the financial exchanges with Gulwests Amron and BigShot Ammunition. General Views Goodwill can be accounted for
in three ways: write off, capitalization and amortization (Johnson, 1993). When writing off, "goodwill is immediately written off against an account in the stockholders equity section, generally retained
earnings" (Johnson, 1993). Writing off was not conceptually correct, but was widely used because it was easy to do and straightforward (Johnson, 1993).
Capitalization "generally is considered to be the most appropriate method" (Johnson, 1993), though it can be difficult to determine what value to use. The residuum approach includes all
errors made in the past, both positive and negative. FASB Guidance FASB Statement 141 addresses accounting for business combinations, as in the case
of merger or acquisition. FASB 141 "supersedes APB Opinion No. 16, Business Combinations, and FASB Statement No. 38, Accounting for Preacquisition Contingencies of Purchased Enterprises" and requires that all
"business combinations in the scope of this Statement are to be accounted for using one method, the purchase method" (Summary of Statement No. 141, 2001).
FASB Statement 142 "addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17" (Summary of Statement No. 142, 2001).
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