(A6.1) If you were an accountant for Talbots, what specifically would be the relevant accounting research question relating to the case? (A6.2) What accounting standards must Talbots consider when...

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Answered Same DayJun 13, 2021

Answer To: (A6.1) If you were an accountant for Talbots, what specifically would be the relevant accounting...

Tanmoy answered on Jun 14 2021
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The Talbots Inc. & subsidiaries: Accounting for Goodwill
(A6.1) If you were an accountant for Talbots, what specifically would be the relevant accounting research question relating to the case?
As per the case st
udy, as an accountant there relevant accounting research questions that will arise is firstly, although of the sales declined by 8% compared to the previous year and the stock price have climbed by 11%, how can the fall in sales boost the shareholders sentiments in future. This will definitely impact the dividend of the investors as the earnings of the company have decreased.
Secondly, it is stated that the goodwill impairment charges were not recorded for the fiscal year February 3rd 2007, January 28th 2006 and January 29th 2005. This could result in overestimation of the net worth or the company value. Goodwill consists of a large part of the Talbots Company’s value. Hence, it needs to be confirmed for impairment annually. It cannot be only amortized just like any other assets.
(A6.2) What accounting standards must Talbots consider when answering the question?
Talbot Inc should take into account the following accounting standards while answering the questions. They are: accounting and impairment for Goodwill, SFAS No. 142, FASB and other Intangible assets.
As per the accounting standards 2001, it has been mandatory to impair goodwill based on a two step model. The first is that once the goodwill has been impaired and charged it can never be re-established to the original book value or carrying cost. If goodwill has been charged to impairment and the goodwill incurs a loss then the loss cannot be reversed. Therefore, IFRS uses the test of impairment for accounting of goodwill and other intangible assets. For other asset accounting, the loss on impairment can be reversed and will be recognised in the books of income statement. This can only be done until the carrying costs do not surpass the deflated historical value when the cost of impairment is unrecognised.
Apart from that, as per SFAS No. 142 there have been two modifications related to the accounting of goodwill which are as...
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