Question

At the end of 2021, Magilke is evaluating the results of the instructional business. Due to fierce competition from online and television (e.g., the Golf Channel), the Old Master reporting unit has been losing money. Its book value is now $410,000. The fair value of the Old Master reporting unit is $330,000. Magilke has collected the following information related to the company’s intangible assets.

Intangible Asset		Expected Cash Flows (undiscounted)		Fair Values
Trade names		$13,800		$4,600
Copyrights		46,000		41,000

Prepare the journal entries required, if any, to record impairments on Larkspur intangible assets. (Assume that any amortization for 2021 has been recorded.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Intangible assets with indefinite useful life (including goodwill) are tested for impairment at least annually and others are tested when there are indications of impairment such as legal restrictions, business restructuring, development of new technology, economic changes.

Under IFRS, comparison is made between the carrying amount of the asset and the higher of fair value and value in use and any excess is recognized as impairment.

Intangible assets are reviewed for impairment at least annually by comparing their carrying value with their fair value and recognizing any impairment loss equal to the amount by which carrying value exceeds fair value.

In the given case Magilike is evaluating the results of Instructional Business.Instructional Business consists of description of speciic tasks and activities within an organisation.Hence this type of business consists of Intangible assets.

From the given question it is clear that because of the fierce competition from online and television Old Master Reporting Unit has been losing money, indicating the need for impairment of Intangible Assets.

Hence Book Value i.e Carrying Value is $410,000

Expected Cash Flow is $ 59,800

and Fair Value is $ 45,600

Hence Impairment Loss= $ 410,000 - $ 45,600

=$364,400