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Case 10-2: Ida’s
When we are using IFRS to examine an impairment of Eagle’s Italy building, one is recognized “if, and only if, the recoverable amount of the building is less than its carrying amount. The carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss.” (IAS 36-59). In order to see if this IFRS is present we must first determine the recoverable amount, which is the higher of a cash-generating unit’s fair value less costs to sell and its value in use (IAS 36-18). Therefore recoverable amount would take the highest of the $900,000 value in use and the $800,000 fair market value less costs to sell. Then IFRS can determine if there is impairment by seeing that the carrying amount of $1,100,000 is greater than the $900,000 value in use. Thus under IFRS an impairment loss of $200,000 has occurred.…
B. After the impairment testing, goodwill associated with the Spanish operations impairs under IFRSs as of 12/31/2012. The impairment loss is $400,000. The new carrying value of the assets is $3.1 million. The new carrying value of the CGU is $1.8 million. Goodwill acquired in a business combination shall be allocated to each of the acquirer’s cash-generating units, or groups of cash generating…
Although it believed that the amount of potential loss was less than 50 percent of the amount claimed which is approximately $250 million, it could be material effect to the financial statements. Based on ASC 275-10-50-8, when it is reasonably possible that the estimate of the effect on the financial statements exists and the effect of the change would be material, disclosure regarding such estimate should be made when known information available before the financial statements are issued.…
Date: 4-11-09Re: Case 3-5A.Discuss the concept of relevance. In your opinion, would the amounts reported by U.S. companies for property, plant, and equipment be more or less relevant than the current cost amounts reported by companies in England, Mexico, or elsewhere?RelevanceInformation is relevant when it influences the economic decisions of users by helping them evaluate past, present, and future or by confirming or correcting their past evaluations. Relevance is also affected by materiality. Information has the quality of relevance when it is 'capable of making a difference in the economic decisions of users by helping them evaluate the effect of past and present events on future net cash inflows (predictive value) or confirm or correct previous evaluations(confirmatory value), even if it is not being used' (FASB, 2005: 2; FASB 1980: 37). In the IASB framework information has the quality of relevance 'when it influences the economic decisions of users by helping them evaluate past, present of future events or confirming, or correcting, their past evaluations' (IASB, 1989: 24). Both frameworks thus say that accounting information is relevant if it has the capacity to make a difference in a decision. The FASB requires information to be capable of making a difference in the economic decisions of users 'even if it is not being used'. However, to be relevant the IASB definition additionally requires that information is used i.e. influences the decision maker in making economic decisions. Another small difference between the FASB and IASB framework is the FASB framework explicitly mentions that relevant information has to have predictive and feedback value, while the IASB uses these terms implicit in its framework. 'The predictive and confirmatory roles of information are interrelated (IASB,1989: 27).…
According to ASC 360-10-20, “an impairment is the condition that exists when the carrying amount of a long-lived asset (asset group) exceeds its fair value”. In order to determine if the impairment exist in the case, we will have to compare the carrying amount with the fair value of the assets. In regards to the municipal bounds, its amortized cost, $8,500,000 exceeds its fair value, $7,500,000. And corporate bonds’ amortized cost, $8,300,000 also exceeds its fair value, $6,800,000. Therefore, the impairments have occurred.…
Sadie incorporates her sole proprietorship with assets having a fair market value of $80,000 and an adjusted basis of $100,000. Even though § 351 applies, Sadie may recognize her realized loss of $20,000.…
If the fair value of standing timber changed during the accounting period, several differences will incur between the treatment under US GAAP and IFRS. If the fair value increases, no accounts are affected under US GAAP. If the fair value decreases, impairment will show on the income statement. Accordingly, the asset accounts (e.g. inventory account) and equity accounts (mainly retained earnings account) are affected but remain relatively stable on US GAAP’s balance sheet if the fair value decreases. In contrast, for IFRS, the income statement and balance sheet are more volatile with changes in the market fair value. There will be gains or impairments on the income statement as well as raise or drop in the value of asset and equity, with accordance to increase or decrease in the fair value.…
On 01/01/2003, Silic should record the one-off, fair-value revaluation as result of its adoption of SIIC tax regime. Because the building was appraised at €12,500 and originally bought at €10,000, the firm needs to make a journal entry to account for this increase in value…
Pinnacle Entertainment is a gaming company with operations in the United States. As a result of increased competition and weakness in the Missouri market, the company took an impairment charge to write down the value of its three properties in the region. How will this charge be reflected on the cash flow statement?…
X Ltd | | | |Accumulated | |Net Book | |Fair | |(at 31.12.2009) | |Cost | |Depreciation | |Value | |Value | | | |(RM) | |(RM) | |(RM) | |(RM) | |Building A | |100,000.00 | |- | |100,000.00 | |120,000.00 | |Plant & Machine | |70,000.00 | |38,000.00 | |32,000.00 | |40,000.00 | |Furniture | |20,000.00 | |10,000.00 | |10,000.00 | |12,000.00 |…
Among differences in the U.S.GAAP and the iGAAP in reference of the intangible assets is significant. International GAAP accepts a limited capitalization of internally generated intangible assets, if there happens to be a chance it is going to be an upcoming advantage and quantity can be consistently measured however the United States GAAP necessitates expensing of all costs related to internally generated intangibles CITATION Kei \l 1033 (Keiso, 2013). International GAAP also necessitates an assessment of impairment to every reporting day or long-standing assets and intangibles as well as records. United States GAAP simply measures the additional of carrying quantity over the asset’s fair valueCITATION Kei \l 1033 (Keiso, 2013). International GAAP permits reversal of damaged losses when there were an alteration in economic situations or in the predictable use of the assets, but United States GAAP,…
(a) ASC 320-10-35-33C states that an other-than-temporary impairment is necessary to recognize when the present value of the cash flows expected is less than the amortized cost of an available-for-sale security at a period end. The impairment is either classified as a credit loss or a non-credit loss, which is calculated as follows:…
Non-functional aircraft barely worth 231 million in the hangar were a huge asset for FCB that within their control. We consider all the aircrafts have a diminished value for future periods, this asset should restate to its new estimated recoverable value and the amount of the write-off becomes an expense for the year 2005. An expense represents resources consumed by the FCB earning activities. All the non-functional aircraft supposedly reduce retained earnings for FCB. If the recoverable value is estimated 231 million, expense amount increased for 231 million and retained earning reduce that same amount…
ASC 360-10, Impairment and Disposal of Long-Lived Assets (ASC 360), provides accounting guidance for impairments of assets that are held for use, held for sale and to be disposed of by other means. In one of its more challenging aspects, ASC 360-10 requires the use of fair value measurements for impairment of assets that are unique and not widely traded. The following publication provides an overview of the accounting for asset impairments as well as interpretive guidance. We hope this publication will help you understand the accounting for the impairment or disposal of longlived assets. We are available to assist you in understanding and complying with this standard and are ready to answer your particular concerns and questions.…
c) The accounting treatment would differ as the cost of demolishing would be with following the book value. When the old building is being demolished, the net book value of the building would be written off. Keep in mind that the construction costs and demolition costs are accounted for in the same way by either company. On one hand, the cost of building the new building would be less costly to the single company, in comparison with Archer Company, because the costs are related to net book value, which is less than the price paid by Archer Company. Archer…