3-2. Roche, in its report for the half-year ended June 30, 20X0 with the following disclosure:...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3-2. Roche, in its report for the half-year ended June 30, 20X0 with the following disclosure: 'Impairment of assets'. When the recoverable amount of an asset, being the higher of its net selling price and its value in use, is less than its carrying amount, then the carrying amount is reduced to its recoverable value. This reduction is reported as an impairment loss. Value in use is calculated using estimated cash flows, generally over a five-year period, with extrapolating projections for subsequent years. These are discounted using an appropriate long-term interest rate. Previously the permitted alternative method for calculating value in use was applied, whereby it was calculated using cash flow projections on an undiscounted basis. As a result, the Group recognized impairment charges of 1,161 million Swiss francs relating to acquired intangible assets. As a result of the impairment, the net book value of intangible assets was reduced by the amount of the impairment charge, and consequently amortization in the first half of 20X0 was 64 million Swiss francs lower than it would have been under the previous policy. Required: a) What are the accounting effects of this change? b) What are the possible reasons behind this change in determining the value in use? c) Summarize the main challenges in performing an impairment test for intangible assets? 3-2. Roche, in its report for the half-year ended June 30, 20X0 with the following disclosure: 'Impairment of assets'. When the recoverable amount of an asset, being the higher of its net selling price and its value in use, is less than its carrying amount, then the carrying amount is reduced to its recoverable value. This reduction is reported as an impairment loss. Value in use is calculated using estimated cash flows, generally over a five-year period, with extrapolating projections for subsequent years. These are discounted using an appropriate long-term interest rate. Previously the permitted alternative method for calculating value in use was applied, whereby it was calculated using cash flow projections on an undiscounted basis. As a result, the Group recognized impairment charges of 1,161 million Swiss francs relating to acquired intangible assets. As a result of the impairment, the net book value of intangible assets was reduced by the amount of the impairment charge, and consequently amortization in the first half of 20X0 was 64 million Swiss francs lower than it would have been under the previous policy. Required: a) What are the accounting effects of this change? b) What are the possible reasons behind this change in determining the value in use? c) Summarize the main challenges in performing an impairment test for intangible assets?
Expert Answer:
Answer rating: 100% (QA)
a The accounting effects of this change include a reduction in the carrying value of intangible asse... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
If you prepared Cash Flow from Operations (CFO) using the direct method, you would need to indicate cash inflows and outflows on a line-by-line basis. Provide the following amounts: a. Cash inflows...
-
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES Rogerson Company's comparative balance sheet as of December 31, 20-2 and 20-1, showed the following with regard to investing and financing...
-
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES Hansen Company's comparative balance sheets as of December 31, 20-2 and 20-1, showed the following with regard to investing and financing...
-
Write a short report in which you assess the impact of one piece of health and safety legislation in an organisation of your choice.
-
What is a quantitative trait locus (QTL)? Does a QTL contain one gene or multiple genes? What technique is commonly used to identify QTLs?
-
For the following exercises, find the value of the number shown on each logarithmic scale. Round all answers to the nearest thousandth. Plot each set of approximate values of intensity of sounds on a...
-
ZeeZee's Construction Company has the opportunity to select one of four projects (A, B, C, or D) or choose the null (do-nothing) alternative. Each project requires a single initial investment and has...
-
The Derby Shoe Company produces its famous shoe, the Divine Loafer, which sells for $ 70 per pair. Operating income for 2012 is as follows: Sales revenue ($ 70 per pair)..... $ 280,000 Variable cost...
-
No Excel solution required Derive a formula that calculates the present value of an annuity that pays $1376 pa quarterly in perpetuity given an annual effective rate of interest of 3.7%. What is the...
-
Consider Sales & Operations planning. If the costs for hiring and firing employees are very small relative to the inventory holding costs, then which Sales & Operations plan is likely to have the...
-
Program a linear regression model from first principles (i.e. you are not allowed to make use of any libraries, either internal or external) that solves for the best least squares method. Your user...
-
Gwendolyn Berry pled guilty to stealing funds from her employer. At sentencing, she was ordered to pay restitution of more than $2 million. To enforce this judgment, the government garnished 50...
-
An insurance applicant is usually protected from the time an application is made, if a premium has been paid, possibly subject to certain conditions. (True/False)
-
The board of directors of U.S. Goods Corporation announces that the corporation will pay a cash dividend to its shareholders. Once declared, a cash dividend is a. a corporate debt. b. a personal debt...
-
An appraiser specializes in estimating property values. (True/False)
-
A writ of execution is issued before the entry of a final judgment. (True/False)
-
Sky is the sole proprietor of CPA accounting firm. She is licensed in the state of Texas and is required to take Continuing Professional Education ("CPE") each year to keep her license active. In...
-
Synthesize the products by drawing out reagents and intermediates along the way. `N H. OH HO HO
-
Under the indirect method of preparing a statement of cash flows, what adjustment is made to net income if accounts receivable increased from last year?
-
At the end of 20-2, Martel Co. had $380,000 in Accounts Receivable and a debit balance of $6,000 in Allowance for Bad Debts. Because it has been operating for only two years, Martel once again wants...
-
Describe how to calculate the following ratios: (a) Return on owners equity (b) Accounts receivable turnover (c) Inventory turnover
-
How much money can be withdrawn at the end of the investment period if a. $1,000 is invested at 8 percent/year compounded annually for 10 years? b. $5,000 is invested at 11 percent/year compounded...
-
What rate of interest compounded annually is involved if a. an investment of \($10\),000 made now will result in a receipt of \($23\),674 ten years from now? b. an investment of \($2\),000 made 18...
-
What is the present value of the following future receipts? a. $19,000 five years from now at 9 percent compounded annually b. $8,300 twelve years from now at 15 percent compounded annually c. $6,200...
Study smarter with the SolutionInn App