Case 12-09 Rough Waters Ahead

+ (5% are 450 sec) + (3% are 125 sec) + (2% are 120 sec)

13. What is the formula for the Present Value (PV) for a finite stream of cash flows (1 per year) that lasts for 10 years?

Before moving forward to compute the present value of these cash flows, a terminal value is required to forecast the long term value of the company after 5 years. . Following formula is used to calculate the terminal value.

Where explain the concept of Intangible asset, which represents assets that absence of physical substance. Moreover, Goodwill represents an asset from which is expected future economic benefits, emerge from the acquisition of other assets or business combination. Another important point would be the impartments testing as refers ASC 350-20-35-28 where indicates that Goodwill of reporting unit must be tested for impairment annually. The test can be accomplished at any time in the fiscal year. In the case of different reporting unit, the impairment test could be at different times. This citation in the memorandum was provided incorrect (ASC 305-20-35-1 and 28) this encoding does not exist in FASB.

As discussed above, if indicators of impairment exist for an asset (group) to be held and used, an entity determines whether the sum of the estimated undiscounted future cash flows attributable to the asset (group) in question is less than its carrying amount. If those undiscounted cash flows are less than

Section 360-10-35-17 of the Code states that an impairment loss shall be recognized if the carrying value of a fixed asset is not recoverable and exceeds its fair value. The carrying value of the fixed asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and disposal of the asset. An impairment loss shall be measured by the amount by which the carrying value exceeds the fair value.

A | Continue operating the cruise ship in the current area. | 10% | $1.0M | $0.9M | $0.7M | $0.7M | $0.7M | $4.0M |

ASC 320-10-35-35: “In periods after the recognition of an other-than-temporary impairment loss for debt securities, an entity shall account for the other-than-temporarily impaired debt security as if the debt security had

The following are the required steps to identify, recognize and measure the impairment of a long-lived asset (group) to be held and used:

An impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is

$155M is the net revenue (profilt) per year which was found by dividing total revenue value of $1.2375B by 8 (i.e. $1.2375B/8)

The authoritative guidance for asset impairment is to ensure that impairment is recorded and dealt with as depreciation. The scope of the standard is writing off of assets and depreciation. According to the guidance of 360-10-35, it address how long-lived assets that are intended to be held and used in an entity’s business shall be reviewed for impairment. The impairment loss can only be recognized if the carrying amount of a long-lived assets is not recoverable and

If these estimated undiscounted future cash flows are less than the carrying value of the asset, an impairment charge is recognized for the excess, if any, of the asset’s carrying value over its estimated fair value.

of CGUs) and then to the other assets in the CGU (or groups of CGUs) pro-rata on the basis of the carrying amount of each asset in the CGU (or groups of CGUs). An impairment loss recognised for goodwill is recognised immediately in profit or

The next step was to calculate the free cash flows for the eleven-year period. In order to do so, we used to following formula: FCF = EBIT(1-tax) + depreciation - change in NWC – CapEx. From here, we used to WACC of 13.89% previously calculated, in order to find the present value of each FCF.