Case Study 1 Essay

751 Words Apr 8th, 2015 4 Pages
Case 1: Astro Incorporated 1. For the following investments, determine if Astro should record an other-than-temporary impairment as of December 31, 2014, and if so, for what amount: * Happy New Year & Co. – Astro should not recognize because it has no intention to sell and there is not a permanent decline. * Beary Beary – Astro should recognize because it has an intention to sell and recognizes an impairment loss of $7 per share ($95-$88). * Buy-A-Lot Company – Astro should not recognize because it has no intention to sell and credit rating upgraded from BBB to BBB+. * ASC 320-10-35-21: “An investment is impaired if the fair value of the investment is less than its cost.” * ASC 320-10-35-33: “When an entity has …show more content…
If the stock price were $95, it wouldn’t change the impairment charge because changes in price before or after the balance sheet date do not affect the amount of impairment charged. * ASC 320-10-35-33: “An other-than-temporary impairment shall be considered to have occurred if the entity intends to sell the securities at a loss shortly after the balance sheet date.” * ASC 320-10-35-34: “An impairment loss shall be recognized in earnings equal to entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made.” 4. For Tohoku Toys, determine if Astro should record an other-than-temporary impairment as of December 31, 2014. * Astro should recognize an other-than-temporary impairment because the fair value is less than its cost and Astro does not expect to collect all interest and principal due to its significant loss from the earthquake. * ASC 320-10-35-21: “An investment is impaired if the fair value of the investment is less than its cost.” * ASC 323-10-35: “A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred that is other than temporary and that shall be recognized even though the decrease in value is in excess of what would otherwise be recognized by

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