Fresh Air Inc. purchased a non - renewable licensing agreement for access to proprietary technology that allows
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Question:
Fresh Air Inc. purchased a nonrenewable licensing agreement for access to proprietary technology that allows it to produce Product X from organic waste. When the year licensing agreement was purchased years ago there were no other companies operating in the space. However, numerous competitors have emerged in the industry as direct competitors to Fresh Air Inc. As a result of recent market entrants, the market demand for Product X has been steadily declining. The company has the following information available related to the licensing agreement:
Licensing agreement at Cost $
Estimated Useful Life years
Salvage Value $
Fresh Air Inc. is currently testing this asset for impairment. The licensing agreement could currently be sold for $ less $ for selling costs. If Fresh Air Inc. keeps producing the Product X for two more years, it expects net cash flows from production to be $ at the end of each of the two years and that the value of the licensing agreement is zero at the end of year two. The current interest rate is
Instructions
a Assume that Fresh Air Inc. follows ASPE and uses the cost recovery impairment model,
Determine if there is an impairment loss and if so what is the amount of the loss? Round to the nearest dollar. marks
Impairment Loss if any:
Related Book For
Posted Date: