In 2015, Microsoft Corporation reported a $5.1 billion charge for the impairment of goodwill and a $2.2 billion charge for the impairment of intangible assets in one of its reporting units (segments) in its 10-K annual report. Referring to Microsoft’s 2015 financial statements and any other information from the media, address the following:
Microsoft’s segments serve as its reporting units for assessing goodwill for potential impairments. Which segment suffered a 2015 impairment? Describe the revenue model for this segment.
What were the underlying business reasons that required Microsoft to record a goodwill impairment in 2015?
How did Microsoft reflect the 2015 goodwill impairment in its income statement and cash flow statement?
Describe in your own words the goodwill impairment testing steps performed by Microsoft in 2015 and the consequent loss measurement.