Question
In: Accounting
On January 1, 2013, Porsche Company acquired the net assets of Saab Company for $449,590 cash....
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Expert Solution
Based on the information available, we can calculate the goodwill impairment, if any for each of the years as follows:-
Recorded value of goodwill = Acquisition price - Fair value of identifiable assets = $449,590 - $375,500 = $74,090
Recorded value of goodwill = $74,090
| Particulars | 2014 | 2015 | 2016 |
| Step 1:- | |||
| Fair value of reporting unit | 400,310 | 399,810 | 349,720 |
| Carrying value of unit | |||
| Carrying value of identifiable net assets | 329,448 | 320,151 | 299,920 |
| Carrying value of goodwill | 74,090 | 60,644 | 60,644 |
| Total carrying value of unit | 403,538 | 380,795 | 360,564 |
| Excess of carrying value over fair value | 3,228 | -19,015 | 10,844 |
| Step 2:- | |||
| Fair value of reporting unit(A) | 400,310 | 349,720 | |
| Fair value of identifiable net assts(B) | 339,666 | 325,640 | |
| Implied fair value of goodwill(A-B) = D | 60,644 | 24,080 | |
| Carrying value of goodwill(C) | 74,090 | 60,644 | |
| Impairment on Goodwill(D-C) | -13,446 | -36,564 |
Please note that for 2015 there is no impairment on goodwill because the fair value of the reporting unit is greater than carrying value of reporting unit and hence Step 2 is not performed.
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