In 2016, Alliant Corporation acquired Centerpoint Inc. for $339 million, of whic

Question

In 2016, Alliant Corporation acquired Centerpoint Inc. for $339 million, of which $59 million was allocated to goodwill. At the end of 2018, management has provided the following information for a required goodwill impairment test:

Required:
1. Determine the amount of the impairment loss.
2. Determine the amount of the impairment loss assuming that the fair value of Centerpoint is $306 million.

(For all requirements, Enter your answer in millions (i.e., 10,000,000 should be entered as 10)).

Fair value of Centerpoint, Inc. $ 247 million Fair value of Centerpoint’s net assets (excluding goodwill) 221 million Book value of Centerpoint’s net assets (including goodwill) 280 million

Explanation / Answer

case 1:

first let us know the implied value of goodwill:

now,

case 2:

here, the fair value ($306million) is greater than book value ($280 million) ,so there is no impairment of good will.

1.Impairment loss $33 million 2.Impairment loss $0 million

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