Ida Impairment

• What impact should the potential foreclosure and extinguishment of debt have on the cash flows used to perform the recoverability test?

Goodwill is considered impaired when the implied fair value of goodwill in a reporting unit of a company is less than its carrying amount, or book value, including any deferred income taxes. By qualitative factors, if the fair value is less than its book value (likelihood more than 50%), two step of the goodwill impairment test is necessary. According to ASC 350-20-35-2 and 3(A&B&D), if the company determines that it is not more likely than not that fair value is less than the book value, it does

Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.For the purposes of impairment testing, goodwill is allocated to each of the Group 's cash-generating units (CGUs), or groups of CGUs, expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired.If the recoverable amount of the CGU (or groups of CGUs) is less than the carrying amount of the CGU (or groups of CGUs), the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups

25-7 If a loss cannot be accrued in the period when ti is probable that an asset had been impaired or a liability had been incurred because the amount of loss cannot be reasonable estimated, the loss shall be charged to the income of the period in which the loss can be reasonably estimated and shall not be charged retroactively to an earlier period. All estimated losses for loss contingencies shall be charged to income rather than charging some to income and others to retained earnings as prior period adjustments.”

US GAAP Alternative A: Meyer Inc. meets both of the characteristics of the primary beneficiary requirements as stated in ASC 810-10-25-38A and thus Florabama’s financials are consolidated up to Meyer Inc’s financial statements. In determining the power to direct the activities of a VIE that most significantly impacts the entity’s economic performance, the purpose and design of a legal entity must be evaluated (ASC 810-10-25-25). Through analysis of the business risks incurred in ASC 810-10-25-24, the most significant risk is the operations risk, commodity price risk, and also environmental risk. These risks are directly related to the strategic decisions regarding the operations of Florabama, such as operating and capital budgets, pricing of the power produced. These are the most significant activities regarding the economic performance of Florabama. According to the case information, these decisions are presented to the board and implemented by a simple majority vote among the ten members of the board of

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.

We will discuss whether the Company’s approach for testing goodwill for impairment after recognizing an impairment charge related to a long-lived asset group classified as held-and-used is appropriate. This issue pertains to whether it is feasible to have a long-lived asset impairment without goodwill impairment.

* Test for recoverability — If indicators are present, perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset (group) in question to their carrying amounts (as a reminder, entities cannot record an impairment for a held and used asset unless the asset first fails this recoverability test).

Based on ASC 320-10-35-34 I mentioned above, the other-than-temporary impairment should be recoded as $28 ($100-$72) as of December 31, 20X1. On January 31, 20X2, when the price of the stock went up to $75, the other-than-temporary impairment should be recoded as $25 ($100-$75). If the share price was $95 instead of $75 on January 31, 20X2, I think no other-than-temporary impairment needs to be recorded, because there is no material decrease occurred.

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

According to the facts provided for Eagle in Italy, we assume that the commercial building, which represents a cash-generating unit (CGU), meets the requirement for a recoverable test under IFRS. The impairment loss is required when the building’s book value exceeds the higher of the asset’s value-in-use and fair value less costs to sell.

f) To evaluate the material misstatement in the accounts, I think both of the consolidated income statement and the three financial statements are useful. We need to use the information properly from all the financial statements. However the consolidated income statement is the most useful one. If there is a significant change in an account balance comparing with preceding two years, the auditor will examine whether there a material misstatement exists. For instance, the bad debt expense as a percent of net sales in 2011, 2010 and 2009 are 0.56%, 0.70% and 0.69%, respectively. There should

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

Another important factor necessitating consideration is the effect the default will have on the nonrecourse debt. In our research we concluded the impact from the default does not influence the UFCF, the fair value, or the carrying value. According to FAS 144, the loss from impairment and the gain from the extinguishment of debt are two separate and distinct transactions. The Board continues to explain “the recognition of an impairment loss should be based on the measurement of the asset at its fair value and that the existence of nonrecourse debt should not influence that measurement.” Thus, the nonrecourse debt does not impact Smooth Sailing’s impairment loss calculations.

This citation in the memorandum was provided incorrect (ASC 305-20-35-1 and 28) this encoding does not exist in FASB. Another consideration is the citation ASC 350-20-35-4, which is related with the first step to accomplish goodwill impairment test. The memorandum stated only the (IAS 36.105) impairment losses.