Explain the meaning of a noncash impairment charge

Reference no: EM133206179

Assignment - Accounting for Employee Stock & Goodwill Impairment Discussions

PART I - Discuss with your team the following case study:

Client X offers a generous employee compensation package that includes employee stock options. The exercise price has always been equal to the market price of the stock at the date of grant. The corporate controller, John Jones, believes that employee stock options, like all obligations to issue the corporation's own stock, are equity. The new staff accountant, Marcy Means, disagrees. Marcy argues that when a company issues stock for less than current value, the value of preexisting stockholders' shares is diluted.

Pretend you are hired to debate the issue of the proper treatment of options written on a company's own stock.

Write a team paper response of 550 to 700 words in which you address the following requirements:

Describe how Client X should account for its employee stock option plan under existing GAAP.

Write a summary of your argument, citing concepts and definitions to buttress your case, assuming:

-You are siding with John.

-You are siding with Marcy.

Format your submission consistent with APA guidelines.

PART II - Discuss the following with your team:

Client X contacted you for clarification and recommendations regarding the instances when goodwill should be adjusted for impairment.

Write a team consensus response of 525 to 700 words to include the following:

Provide detailed rational of why goodwill must be adjusted for impairment.

List the tests for impairment.

Explain the meaning of a noncash impairment charge.

Reference no: EM133206179

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