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Analyzing Goodwill Impairment

Telecom giant AT&T Inc. reported the following information in its recent $10-$K filing.

Our annual goodwill impairment analysis resulted in noncash impairment charges related to our Business Wireline, Consumer Wireline, and Mexico reporting units. The decline in fair values was primarily due to changes in the macroeconomic environment, namely increased weighted$-$average cost of capital. Also, inflation pressure and lower projected cash flows driven by secular declines, predominantly at Business Wireline, impacted the fair values. A summary of business unit goodwill impairment by segment and sensitivity analysis is as follows:

Communications$ millionsBusiness WirelineConsumer WirelineMexicoGoodwill, beginning of period$$17,903$$$30,155$$$826$Impairment charge$(13,478)(10,508)(826)$Remaining Goodwill, end of period$$4,425$$$19,647$$$-$

Required

a$.$ What was the total amount of AT&T$$s goodwill impairment?

Note: Do not use a negative sign.

$Answer $1$

b$.$ What proportion of goodwill was deemed impaired for each segment and in total?

$ millionsNumeratorDenominatorProportion of Goodwill ImpairedBusiness WirelineAnswer $2$

Answer $3$

Consumer WirelineAnswer $4$

Answer $5$

MexicoAnswer $6$

Answer $7$

TotalAnswer $8$

Answer $9$

c$.$ What was the total cash$-$flow effect of the goodwill impairment?

Note: Enter cash inflows as positive and cash outflows as negative.

Answer $10$

d$.$ Goodwill was deemed impaired because the company$$s weighted$-$average cost of capital $($WACC$)$ increased. Suppose that in the following year, AT&T$$s WACC dropped such that the fair value of goodwill increased. How would this increase in fair value affect net income?

The goodwill impairment chargeAnswer $11$cancannotbe reversed.

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