Galaxy Sports Inc

815 WordsDec 8, 20144 Pages
Relevant Facts Galaxy Sports is a publicly traded U.S.-based manufacture of sports equipment with three reporting units, Fitness Equipment, Gold Equipment, and Hockey Equipment. They are in a competitive industry in which growth and profitability are tied to the market and consumer demand. All three components are managed separately therefore discrete financial information is available for each component. In December 2011, Galaxy engaged Big Time LLC to perform three annual ASC 350, Intangibles- Goodwill and Other, impairment analysis on the $360 million (composed of $200 million from Fitness Equipment, $130 million from Golf Equipment, and $30 million from Hockey Equipment) of goodwill recorded by Galaxy as of December 21, 2011. Big…show more content…
Therefore, I believe that management should have performed an interim goodwill step 1 impairment test as of September 30, 2012 to determine whether the fair value of the reporting units have either gone below its carrying value during the interim period. According to ACS 350-20-35-3A, an entity may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount, including goodwill. In evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, an entity shall assess relevant events and circumstances as indicated under ASC 350-20-35-3C. As indicated earlier, Galaxy was experiencing competition from imports and had determined that the earnings and share price declined through-out the fiscal year, these events could potentially lead Galaxy’s reporting units fair value to fall below the carrying amount of both reporting units. If no interim step 1 test was required, then management should have performed a step 1 impairment analysis for the Fitness Equipment and Hockey Equipment reporting units at year end to determine whether the fair value of the reporting units have either gone below its carrying value or significantly decreased due to the sports equipment imports from China selling at a lower
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