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Assignment: Case No. 2
ACTG 4650, Phillips
Due date: June 28, 2012

Trueblood Case 04-9 Healthcare Depot, Part 3 only. You will find the case at the following website. Just pagedown to find case 04-9.

http://www.deloitte.com/us/truebloodcases

Since we are not doing parts 1 and 2, assume that DDC Distribution and HC Holding are aggregated to be one reporting unit.

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“Goodwill is defined as an asset acquired in a business combination that has future economic benefit and is result of acquired assets that could not be separately recognized and identified individually. Goodwill that is computed in a business combination using the provisions of ASC business combination is not amortized but is tested for impairment using special impairment rules of ASC goodwill. Goodwill must be tested for impairment using a two-step reporting level basis.”

Step One:

 Table # 1|  | DDC Distribution Corp.| HC Holding| Total| CV of Net Assets w/o Goodwill|  | 231,700,000| 72,250,000| 303,950,000| CV of Goodwill|  | 10,500,000| 2,150,000| 12,650,000| CV of reporting units|  | 242,200,000| 74,400,000| 316,600,000| FV of Reporting units|  | -236,000,000| -75,000,000| -311,000,000| Excess of CV|  | 6,200,000| -600,000| 5,600,000|

Step one, the carrying amount of the reporting unit to which goodwill was assigned is compared to its fair value. If the carrying value of the unit is less than its fair value, no impairment exists and the second step of the impairment test is not required. However, if fair value of the reporting unit is less than the carrying amount, the second step of the impairment test is must be performed to determine the amount of the impairment loss. Regardless of Healthcare Depot, only two divisions of DDC Distribution Corp. and HC Holding which have excess of 5.6 millions on carrying value of its net assets and goodwill based on above table. Consequently,...