EXERCISE $115$

Goodwill Impairment LO $2$

PMC acquired $100\%$ of S Company for $200,000$ when the fair value of the identifiable net assets was $160,000.$ PMC operates in three geographical regions: Europe, North America, and South America. Each region is classified as a CGU $($each unit generates cash independently of the other regions$).$ All three regions are expected to benefit from the acquisition of S Company and goodwill is allocated $50\%$:$25\%$:$25\%$ to Europe, North America, and South America, respectively. The net identifiable assets of S Company were assigned to the Europe CGU. Goodwill is tested for impairment on December $31$ of each year. The only goodwill on the books is from the acquisition of S Company. Assume the cost of disposal for each CGU is negligible $($for this example$).$

On December $31,$ carrying value, the fair value, and the value in use $($as projected by PMC$)$ for each CGU were as follows $($the carrying value does not include goodwill$)$:

Carrying Value

Fair Value

Value in Use

Europe $450,000480,000473,000$

North America $350,000360,000345,000$

South America $150,000135,000130,000$

Required:

If PMC uses the fair value method to record noncontrolling interest, determine the amount of goodwill impairment $($and any asset impairment, if needed$).$

If PMC uses the proportionate method to record noncontrolling interest, determine the amount of goodwill impairment $($and any asset impairment, if needed$).$

How is goodwill impairment tested using U$.$S$.$ GAAP?