Blossom Company owns a trade name that was purchased in an acquisition of Sunland Company. The trade name has a book value of $3,000,000, but according to IFRS, it is assessed for impairment on an annual basis. To perform this impairment test, Blossom must estimate the fair value of the trade name (using IFRS 13). It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Blossom's estimate of annual cash flows over the next 9 years. The trade name is assumed to have no salvage value after the 8 years. (Assume the cash flows occur at the end of each year.)

Cash Flow Estimate		Probability Assessment
$370,000			20	%
620,000			50	%
740,000			30	%

                                                                                                                                              

n period	2%	2.5%	3%	4%	5%	6%	8%	9%	10%	11%	12%	15%
1	0.98039	0.97561	0.97087	0.96156	0.95238	0.94340	0.92593	0.91743	0.90909	0.90090	0.89286	0.86957
2	0.96117	0.95181	0.94260	0.92456	0.90703	0.89000	0.85734	0.84168	0.82645	0.81162	0.79719	0.75614
3	0.94232	0.92860	0.91514	0.88900	0.86384	0.83962	0.79383	0.77218	0.75132	0.73119	0.71178	0.65752
4	0.92385	0.90595	0.88849	0.85480	0.82270	0.79209	0.73503	0.70843	0.68301	0.65873	0.63552	0.57175
5	0.90583	0.88385	0.86261	0.82193	0.78353	0.74726	0.68058	0.64993	0.62092	0.59345	0.56743	0.49718
6	0.88797	0.86230	0.83748	0.79031	0.74622	0.70496	0.63017	0.59627	0.56447	0.53464	0.50663	0.43233
7	0.87056	0.84127	0.81309	0.75992	0.71068	0.66506	0.58349	0.54703	0.51316	0.48166	0.45235	0.37594
8	0.85349	0.82075	0.78941	0.73069	0.67684	0.62741	0.54027	0.50187	0.46651	0.43393	0.40388	0.32690
9	0.83676	0.80073	0.76642	0.70259	0.64461	0.59190	0.50025	0.46043	0.42410	0.39092	0.36061	0.28426
10	0.82035	0.78120	0.74409	0.67556	0.61391	0.55839	0.46319	0.42241	0.38554	0.35218	0.32197	0.24719

(a) What is the estimated fair value of the trade name? Blossom determines that the appropriate discount rate for this estimation is 9%.(For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round final answer to 0 decimal places, e.g. 5,275.)

Answer rating: 100% (QA)

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