Sprint Nextel Case
Sprint Nextel Case Analysis 1. How much goodwill impairment charge did Sprint Nextel report in 2007?
During 2007, Sprint Nextel recorded a non-cash impairment charge of $29.7 billion in accordance with Statement of Financial Accounting Standards, or SFAS, No. 142 Goodwill and Other Intangible Assets. 2. Why did Sprint Nextel write down their goodwill in 2007? What are some other indicators for goodwill impairment in general?
Sprint Nextel wrote down their goodwill in 2007 primarily due to the company’s acquisition of Nextel in 2005 and reflects the reduction in estimated fair value of Sprint’s wireless reporting unit subsequent to the acquisition resulting from, among other factors, net losses of post-paid subscribers. Some other …show more content…
144, Accounting for the Impairment or Disposal of Long-Lived Assets. They included cash flow projections from their wireless operations along with cash flows associated with the eventual disposition of the long-lived assets, which included estimated proceeds from the sale of FCC licenses, trade names, and customer relationships. The undiscounted future cash flows of the wireless long-lived assets exceeded their net book value. As a result, no impairment charge was recorded. Sprint Nextel reviews their long-lived intangible asset groups for impairment under the same policy for property, plant and equipment, that is, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment analyses, when performed, are based on their current business and technology strategy, their views of growth rates for the business, anticipated future economic and regulatory conditions and expected technological availability. In addition, when their annual goodwill test requires them to determine the implied fair value of goodwill, they also evaluate the recorded value of our long-lived assets for …show more content…
Is goodwill impaired in the same way under IFRS? Does IFRS also employ a two-step approach for goodwill impairment testing? If not, how is goodwill tested for impairment under IFRS? (Refer to IAS 36 Impairment of Assets.)
Both U.S. GAAP and IFRS require goodwill to be written down when impaired. There are some differences between U.S. GAAP and IFRS in recognizing and recording impairment, but in principle, the ultimate goal is the same. Both standards require entities to test impairment for goodwill if there appears to be any indication that impairment may exist. Goodwill, along with any other indefinite lived assets, must be tested annually for impairment.
U.S. GAAP impairment testing process involves determining the level of impairment based on a valuation of the entire entities tangible and intangible assets. Under IFRS, however, the impairment is equal to the difference between the carrying value and the fair value of the entire entity.
There are also differences in testing for goodwill. U.S. GAAP uses a two-step process for determining and measuring the impairment. Step one compares the fair value to the carrying value. If the carrying value exceeds the fair value, the goodwill is impaired. To measure impairment, we must compare the fair value of all assets in which goodwill is measured using a residual
During 2007, Sprint Nextel recorded a non-cash impairment charge of $29.7 billion in accordance with Statement of Financial Accounting Standards, or SFAS, No. 142 Goodwill and Other Intangible Assets. 2. Why did Sprint Nextel write down their goodwill in 2007? What are some other indicators for goodwill impairment in general?
Sprint Nextel wrote down their goodwill in 2007 primarily due to the company’s acquisition of Nextel in 2005 and reflects the reduction in estimated fair value of Sprint’s wireless reporting unit subsequent to the acquisition resulting from, among other factors, net losses of post-paid subscribers. Some other …show more content…
144, Accounting for the Impairment or Disposal of Long-Lived Assets. They included cash flow projections from their wireless operations along with cash flows associated with the eventual disposition of the long-lived assets, which included estimated proceeds from the sale of FCC licenses, trade names, and customer relationships. The undiscounted future cash flows of the wireless long-lived assets exceeded their net book value. As a result, no impairment charge was recorded. Sprint Nextel reviews their long-lived intangible asset groups for impairment under the same policy for property, plant and equipment, that is, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment analyses, when performed, are based on their current business and technology strategy, their views of growth rates for the business, anticipated future economic and regulatory conditions and expected technological availability. In addition, when their annual goodwill test requires them to determine the implied fair value of goodwill, they also evaluate the recorded value of our long-lived assets for …show more content…
Is goodwill impaired in the same way under IFRS? Does IFRS also employ a two-step approach for goodwill impairment testing? If not, how is goodwill tested for impairment under IFRS? (Refer to IAS 36 Impairment of Assets.)
Both U.S. GAAP and IFRS require goodwill to be written down when impaired. There are some differences between U.S. GAAP and IFRS in recognizing and recording impairment, but in principle, the ultimate goal is the same. Both standards require entities to test impairment for goodwill if there appears to be any indication that impairment may exist. Goodwill, along with any other indefinite lived assets, must be tested annually for impairment.
U.S. GAAP impairment testing process involves determining the level of impairment based on a valuation of the entire entities tangible and intangible assets. Under IFRS, however, the impairment is equal to the difference between the carrying value and the fair value of the entire entity.
There are also differences in testing for goodwill. U.S. GAAP uses a two-step process for determining and measuring the impairment. Step one compares the fair value to the carrying value. If the carrying value exceeds the fair value, the goodwill is impaired. To measure impairment, we must compare the fair value of all assets in which goodwill is measured using a residual