Goodwill Case
1.
To determine whether or not the building is impaired, a recoverability test must be performed. According to IAS 36-74, the recoverable amount is defined by “the higher of an asset or cash generating unit’s fair value less costs to sell and its value in use.” The value in use is $900,000 and the fair market value less costs to sell is $800,000. Because of the value in use is higher than the fair market value less costs to sell, the recoverable amount would be $900,000. The impairment loss is the difference between the carrying amount of $1,100,000, and the recoverable amount of $900,000. Under IFRS, the building is impaired by $200,000 as of December 21, 2010.
2. According to ASC 360-10-35-17, “ An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.”
Based on this evidence, because the carrying amount of $1,100,000 is less than the undiscounted future cash flows of $1,150,000, the building is recoverable and there is no impairment loss. Therefore, under GAAP, the building is not impaired as of December 31, 2010.
3.
Part 1.
Under GAAP, there is a two-step goodwill impairment test. ASC 350-20-35-4 says the first step is “used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. ”
Step 1:
Fair Value of Eagle’s CGU in Serbia $1,050,000
Fair Value of Eagle’s CGU in Serbia’s
To determine whether or not the building is impaired, a recoverability test must be performed. According to IAS 36-74, the recoverable amount is defined by “the higher of an asset or cash generating unit’s fair value less costs to sell and its value in use.” The value in use is $900,000 and the fair market value less costs to sell is $800,000. Because of the value in use is higher than the fair market value less costs to sell, the recoverable amount would be $900,000. The impairment loss is the difference between the carrying amount of $1,100,000, and the recoverable amount of $900,000. Under IFRS, the building is impaired by $200,000 as of December 21, 2010.
2. According to ASC 360-10-35-17, “ An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.”
Based on this evidence, because the carrying amount of $1,100,000 is less than the undiscounted future cash flows of $1,150,000, the building is recoverable and there is no impairment loss. Therefore, under GAAP, the building is not impaired as of December 31, 2010.
3.
Part 1.
Under GAAP, there is a two-step goodwill impairment test. ASC 350-20-35-4 says the first step is “used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. ”
Step 1:
Fair Value of Eagle’s CGU in Serbia $1,050,000
Fair Value of Eagle’s CGU in Serbia’s