ABSTRACT
This real-world case helps students understand the subjectivity in measuring goodwill and identify potential managerial biases that affect the valuation and impairment of goodwill. The case describes an acquisition made by a telehealth company—Teladoc—during the COVID-19 pandemic when the market sentiment for digital companies was extremely positive. When market sentiment is positive, managers can overpay for acquisitions, leading to a higher carrying value of goodwill. However, when the market sentiment turns negative, managers can be slow to acknowledge that they overpaid, leading to delayed recording of goodwill impairment. Students must apply higher-order learning skills to evaluate the appropriateness of managerial assumptions in assessing goodwill. The case is most appropriate for use in intermediate accounting, accounting theory, professional research, and capstone accounting courses that address the topic of goodwill and goodwill impairment. It can be used in undergraduate as well as graduate-level courses.
JEL Classifications: A22; A23; M41.
