Question

Quiche & Tell, Inc. has discovered that its goodwill has been impaired because the secret recipe it received when it purchased its competitor is no longer a secret. This impairment will ______.

Answer 1

Goodwill impairment for Quiche & Tell, Inc. will reduce the value of goodwill on the company's balance sheet due to the previously secret recipe becoming publicly known.

Step-by-step explanation:

Quiche & Tell, Inc. has discovered that its goodwill has been impaired because the secret recipe it received when it purchased its competitor is no longer a secret. This impairment will reduce the value of goodwill on the company's balance sheet. Goodwill impairment occurs when the value of goodwill on a company's financial statements exceeds the fair value of the asset as determined by its market value, requiring a write-down to reflect the new value. In this case, the secret recipe's loss of exclusivity impacts Quiche & Tell, Inc.'s competitive advantage, thus diminishing the anticipated economic benefits of the acquisition and leading to an impairment charge.