Question

1. Information has been collected regarding Black Company's asset group that includes Goodwill. Black company follows ASPE. At December 31st, 2015, the assets of the Black company's asset group are shown as follows (in millions of dollars) on the company's balance sheet:

	Cost	Accumulated Depreciation	Net Book Value
Current Assets	$300	n/a	300
Goodwill	$400	n/a	400
Equipment	$1,400	800	600
Buildings	$2,100	600	1,500
Patent Rights	$200	80	$120
TOTAL ASSETS	$4,400	$1,480	$2,920
Liabilities	($520)		($520)

The fair values/recoverable amounts of the individual identifiable assets and liabilities are shown below (note the exclusion of the Goodwill from above since Goodwill is not identifiable):

Current Assets	$300
Customer Lists	$500 (previously unidentified)
Equipment	$250
Buildings	$1,000
Patent Rights	$200
Liabilities	($520)

The value of the asset group as a whole is $1.9 million, while estimated selling costs are $100,000.

Required:

Prepare the journal entries to record the impairment of Goodwill as well as any other assets under ASPE

Answer 1

Impairment loss	820
	Goodwill		400
	Accumulated depreciation - equipment		113
	Accumulated depreciation – buildings		286
	Accumulated amortization – patent rights		21

Calculations:

Asset	Net book value	Proportion	Allocation of impairment loss	Adjusted carrying value
Goodwill	400		400	0
Equipment	600	27%	113	487
Buildings	1,500	68%	286	1,214
Patent rights	120	5%	21	99
	$ 2,220*	100%	$ 820	$ 1,800

*The impairment loss is first allocated to goodwill. Then any remaining amount is allocated to the remaining assets on a proportionate basis. The total net book value excludes the net book value of goodwill since this is not included for the allocation of the loss. If there is a reversal of impairment the goodwill amount would not be reversed. The value of the goodwill would remain at 0. It is only for the other assets that the impairment would be reversed.