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Sir,
When an impairment of goodwill arises post acquisition ; why should we remove the impairment loss both in Income statement and retained earnings ? Would’t that have a double effect as the reduction in profit will affect the value of retained earnings subsequently
The reserve that goes by the title Retained Earnings used to be called Accumulated Profit and Loss
It’s the figure that literally represents the non-distributed profits that the entity has achieved since day 1 of that entity’s existence
It’s the accumulated retained earnings from all the previous years PLUS the retained earnings from this year
When goodwill is impaired this year, it reduces this year’s profits
And that means that, when we’re looking at the retained earnings figure for the statement of financial position, the figure for this year’s profits (that we are going to add to the accumulated retained earnings figure brought forward) has been reduced by that goodwill impairment
Is that any clearer?
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