Free CPA BAR (Business Analysis & Reporting) Technical Accounting and Reporting Practice Questions

A is correct. Under ASC 350, goodwill is tested for impairment at least annually at the reporting unit level. In addition, interim impairment testing is required whenever events or changes in circumstances (triggering events) indicate that the fair value of a reporting unit may have fallen below its carrying amount. Examples of triggering events include significant adverse changes in business climate, loss of key personnel, or a sustained decline in stock price.
Choice B is incorrect because it omits the mandatory annual testing requirement. Choice C fabricates a five-year testing cycle that does not exist under ASC 350. Choice D ties impairment testing to equity issuances, which is not a prescribed trigger under the standard.

C is correct. Under ASC 815, a cash flow hedge designates a derivative to hedge exposure to variability in cash flows (e.g., floating rate debt, forecasted commodity purchases). Effective portions of gains/losses on the hedging instrument are deferred in OCI and reclassified to earnings when the hedged transaction affects earnings. A fair value hedge designates a derivative to hedge changes in fair value of a recognized asset or liability (e.g., fixed-rate debt). Both the derivative and the hedged item are marked to fair value through earnings. Choice B incorrectly restricts hedge types by risk category; both types can apply to interest rate, FX, or commodity risks. Choice A incorrectly claims the hedging instrument in a cash flow hedge is at historical cost; all derivatives are carried at fair value on the balance sheet regardless of hedge designation. Choice D incorrectly restricts the hedging instrument type for cash flow hedges.

B is correct. Under the full goodwill method, goodwill = (Consideration paid + Fair value of NCI) − Fair value of identifiable net assets = (\$800,000 + \$200,000) − \$900,000 = \$1,000,000 − \$900,000 = \$100,000.
Choice A is incorrect because \$80,000 results from computing goodwill on only the parent's 80% share: (\$800,000 − 80% × \$900,000) = \$800,000 − \$720,000 = \$80,000, which is the partial goodwill method not required under ASC 805.
Choice C is incorrect because \$200,000 equals the fair value of NCI, not the goodwill amount.
Choice D is incorrect because \$120,000 likely adds the partial goodwill of \$80,000 to some incorrect adjustment rather than using the full goodwill calculation.