Impairment under IFRS: Example 1: Company D purchased Company E for $900,000. Company E has two cash-generating
Question:
Impairment under IFRS: Example 1: Company D purchased Company E for $900,000. Company E has two cash-generating units: CGU1 and CGU2. The carrying value is allocated as follows:
CGU 1 | CGU2 | |
Net assets | $ 180,000 | $360,000 |
Goodwill | 120,000 | 240,000 |
Total assets | $300,000 | $600,000 |
One year later, an impairment test finds the fair value of Company E to be $720,000, indicating an impairment of $ 180,000. After recording the impairment loss and allocating it, show how the following accounts would appear:
CGU1 | CGU2 | |
Net assets | $? | $? |
Goodwill | ? | ? |
Total assets | $? | $? |
Assume that in a following year, the fair value of Company E continues to decline and is now found to be $450,000. After recording the impairment loss and allocating it, show how the following accounts would appear:
CGU1 | CGU2 | |
Net assets | $? | $? |
Goodwill | ? | ? |
Total assets | $? | $? |
Ethical Obligations and Decision Making in Accounting Text and Cases
ISBN: 978-0077862213
3rd edition
Authors: Steven Mintz, Roselyn Morris