Restucturng

This case gives students an opportunity to determine the accounting for impairment of long-lived assets in accordance with ASC 360-10.

“A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.”

ISSUE: Accounting for Fuzzy Dice Inc. acquisition of Tiny Tots Toys LLC related to decision (1) to use purchased facility to enter another business line or (2) renovate the facility to expand the current production.

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.”

According to ASC 410-20-25-10, instances may occur in which insufficient information to estimate the fair value of an asset retirement obligation is available. For example, if an asset has an indeterminate useful life, sufficient information to estimate a range of potential settlement dates for the obligation might not be available. In such cases, the liability would be initially recognized in the period in which sufficient information exists to estimate a range of

“Recognition of an impairment loss and the recognition of a gain on the extinguishment of debt are separate events, and each event should be recognized in the period in which it occurs. The Board believes that 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.” (Statement 144, paragraph B34)

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

ASC 42-10-25-8 states that entity should recognize obligation related to the termination of employees, the liability for termination benefits should be recognized at the communication date. According to ASC 42-10-30-4 through 30-6 this liability shall be measured at its fair value. In this case, Pharam Co. will not show the liability of $3 million for the termination benefits on its December 31, 2010 Balance Sheet.

“A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.”

ASC 410-20-25-8 indicates that an asset retirement obligation is estimable if all of the following exist:

The state laws requiring LOI to remove the asbestos create an obligation to remove the asbestos under ASC 410-20-15-2a for the ten warehouses that LOI will sell within five years. ASC 410-20-25-8b indicates that an asset retirement obligation is estimable if all of the following exist:

Harburg Ltd. Epic Ltd. 20 27 9 13 14 25 29 28 22 30 10 30 4 5 6 11 28

recognized. At worst, there is not sufficient information (based on ASC 410-2025-10) to determine the fair value of the asset retirement obligation as it is

Excess/ obsolescence costs (including cost of inventory adjustments, end-of-life write-offs, scrap, material obsolescence and obsolete product rebate programs)

The decision to terminate an employee should only be considered after taking