How should steve respond to kim

Assignment Help Accounting Basics

Reference no: EM13757064

The following is an excerpt from a conversation between the chief executive officer, Kim Jenkins, and the chief financial officer, Steve Mueller, of BKX Group Inc.:

Kim: Steve, as you know, the auditors are coming in to audit our year-end financial statements pretty soon. Do you see any problems on the horizon?

Steve: Well, you know about our "famous" Scher Company acquisition a couple of years ago. We booked $9,000,000 of goodwill from that acquisition, and the accounting rules require us to recognize any impairment of goodwill.

Kim: Uh-oh.

Steve: Yeah right. We had to shut the old Scher Company operations down this year because those products were no longer selling. Thus, our auditor is going to insist that we write off the $9,000,000 of goodwill to reflect the impaired value.

Kim: We can't have that - at least not this year! Do everything you can to push back on this one. We just can't take that kind of a hit this year. The most we could stand is $5,000,000. Steve, keep the write-off to $5,000,000 and promise anything in the future. Then we'll deal with that when we get there.

Address the following question:

How should Steve respond to Kim? Support your analysis.

Reference no: EM13757064

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