Economic Association Event Decline in Sales and Profits
A one-time charge associated with an economic event will have a
negative impact on the financial structure because it can reduce the
amount of assets and will flow through the income statement by lowering
stockholder equity. This effect will be reported in the financial press.
Goodwill may be subject to allegations because of the acquisition of
overpayment position in the market. Furthermore, if the goodwill
allegations are proven to be untrue, management will be reluctant to
accept the charges. On the other hand, a new management team in the
company may attribute charges to poor decisions made by their
predecessors by reducing the possibility of future goodwill to be
impaired. For example, rule APB No. 17 indicates that the amortized life
of goodwill is a period of 40 years. Therefore, the new rule of intangible
assets shows that goodwill should be amortized over its useful life (Zang,