For goodwill impairment test - step one: American corporation - reporting units Subsidiary a Subsidiary b...

For goodwill impairment test - step one:

American corporation - reporting units
	Subsidiary a	Subsidiary b
Fair value of reporting unit	$137,000,000	$ 230,000,000
Carrying value of net assets (excluding goodwill)	112,000,000	210,000,000
Carrying value of goodwill	21,000,000	46,000,000

For goodwill impairment test - step two:

Fair value - tangible net assets	$ 72,000,000	$ 114,000,000
Fair value - recognized intangibles	43,000,000	80,250,000
Fair value - unrecognized intangibles:
trademark	1,500,000	4,000,000
Employment contract	2,000,000	8,000,000
Assembled workforce	5,000,000	5,000,000
In-process research & development	2,500,000	7,000,000
Potential contracts	4,000,000	3,000,000
Customer list	1,000,000	6,000,000

What is indication of goodwill imparement (step 1)?

What is carrying value of the company A and B?

What is fair value of goodwill company A and B?

What is carrying value of goodwill company A and B?

What is book value of identifiable net asset company A and B?

What is fair value of identifiable net asset of company A and B?

What is goowill impairment loss for company A and B?

Solutions

Expert Solution

		subsidiary A	subsidiary B
fair value of the companies		137000000	230000000	A

carrying value of net assets (excluding goodwill)		112000000	210000000
carrying value of goodwill		21000000	46000000
carrying value of the companies		133000000	256000000	B

difference (A-B)		4000000	-26000000

there is an indication that goodwill of company B is impaired (step 1) as fair value is less than carrying value
-26000000	(Ans 1)

carrying value of the companies		133000000	256000000		(Ans 2)

Fair value of tangible net assets		72000000	114000000	C
Fair value of recognised intangibles		43000000	80250000	D
Fair value of identifiable net assets (C + D)		115000000	194250000		ans 6

Fair value of unrecognized intangibles
trademark		1500000	4000000
employment contract		2000000	8000000
assembled work force		5000000	5000000
In process research and development		2500000	7000000
Potential contracts		4000000	3000000
customer list		1000000	6000000
total Fair value of unrecognized intangibles		16000000	33000000	E

fair value of goodwill (A- total assets)		6000000	2750000	F	ans 3

carrying value of goodwill		21000000	46000000	G	ans 4 given in the problem

Book value of identifiable net assets		112000000	210000000		ans 5

Good will impairment loss(F-G)		NIL	-43250000		ans 7

For subsidiary A there is no impairment loss as in Step 1 carrying value < fair value

ekkarill92 answered 1 year ago

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