1. Critically analyse the allocation of acquisition cost to goodwill by considering the following questions
a. Is the allocation of acquisition cost to goodwill subjective? Discuss.
b. How does the allocation of acquisition cost to goodwill affect profit and cash flows in subsequent years? For your critical analysis, you could compare the effect of the accounting treatment of goodwill in subsequent years with the effect of the accounting treatment of property, plant and equipment (or intangibles with finite useful lives) in subsequent years. [word limit: 250 words]
2. The reported goodwill on the Balance Sheet may reveal managers’ private information of a firm’s future cash flows. However, research argues that subsequent treatment of goodwill may provide opportunities for earnings management. Discuss whether the accounting treatment of goodwill in subsequent years could be a concern for financial reporting. [word limit: 400 words]
the attached file is the case study to which the questions are to be referred to.
