Acme Co., a consolidated enterprise, conducted an impairment review for each of

Question

Acme Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, One particular reporting unit, Martel, emerged as a candidate for possible goodwill impairment. Martel has recognized net assets of $1,101, including goodwill of $680. Martel’s fair value is assessed at $1,055 and includes two internally developed unrecognized intangible assets (a patent and a customer list with fair values of $189 and $105, respectively). The following table summarizes current financial information for the Martel reporting unit:

Determine the amount of any goodwill impairment for Acme’s Martel reporting unit. (Input the amount as a positive value.)

After recognition of any goodwill impairment loss, what are the reported book values for the following assets of Acme’s reporting unit Martel? (Leave no cells blank - be certain to enter "0" wherever required.)

Carrying
Amounts   Fair
Values   Tangible assets, net $ 127     $ 175      Recognized intangible assets, net 294     339      Goodwill 680     ?      Unrecognized intangible assets 0     294         Total $ 1,101    $ 1,055

Explanation / Answer

a. Goodwill Impairment

Step 1

Fair value of reporting unit = $1,055

Carrying value of reporting unit = $1,101

Because fair value < carrying value, there is a potential goodwill impairment loss.

Step 2

Fair value of reporting unit = $1,055

Fair value of net assets excluding goodwill = Tangible assets + Recognized intangibles + unrecognized intangibles = $175 + $339 + $294 = $808

Implied value of goodwill = $1,055 - $808 = $247

Carrying value of goodwill = $680

Goodwill impairment loss = $680 - $247 = $433

b.

Tangible assets net

$ 127

Goodwill

$ 247

Customer list

$ 0

Patent

$ 0

Tangible assets net

$ 127

Goodwill

$ 247

Customer list

$ 0

Patent

$ 0

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