Goodwill Impairment Case

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Gabrielle Paulsen SCH-MGMT 797AT Goodwill Impairment Case 1) It was not necessary for management to perform an interim goodwill step 1 impairment test as of September 30, 2012. At the end of 2011 a goodwill impairment analysis was performed by Big Time, an external valuation firm. It was determined that each reporting unit, Fitness, Golf, and Hockey, each passed the step 1 impairment test. There was significant cushion between the fair values and the carrying values, likely because sales in 2011 Q4 were very strong, as usual, due to the holiday season. In the first and second quarters of 2012 the earnings were below expectations because of a bad economy and slowing sales of recreational activities. It was determined in Q3 that performing an interim goodwill impairment test was unnecessary after reviewing ASC 350 and this determination was accurate. According to the ASC 350 an interim test is only necessary if an event occurs that would cause the fair value to be reduced below the carrying amount or if the carrying amount is zero or negative. Circumstances that would cause the fair value to fall below the carrying value are things such as macroeconomic conditions, industry and market considerations, cost factors like an increase in labor or raw materials costs, and overall changes in financial performance. There were no significant events or circumstances that would lead Galaxy to believe that the fair value was more likely than not to fall below the carrying value, expect maybe the fact that the market was not doing well. However, this was not significant enough because historically Galaxy has performed the best in Q4 and there was no indication that this would be any different in 2012. There was such a large cushion between the fair value and the carrying amount in previous quarters and years that Galaxy did not predict the fair value would fall

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