Alomar Co., a consolidated enterprise, conducted an impairment review for each o

Question

Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill impairment. Sellers has recognized net assets of $1,094, including goodwill of $755. Seller’s fair value is assessed at $1,028 and includes two internally developed unrecognized intangible assets (a patent and a customer list with fair values of $199 and $56, respectively). The following table summarizes current financial information for the Sellers reporting unit:

a.Determine the amount of any goodwill impairment for Alomar’s Sellers reporting unit.

b.After recognition of any goodwill impairment loss, what are the reported book values for the following assets of Alomar’s reporting unit Sellers?

•Tangible assets, net.

•Goodwill.

•Patent.

•Customer list.

Carrying
Amounts Fair  
Values Tangible assets, net $    84 $ 137 Recognized intangible assets, net      255 326 Goodwill      755 ? Unrecognized intangible assets         0 255 Total $1,094 $1,028

Explanation / Answer

Impairemnet is done at business unit level and it is not done at individual assets i.e. Impairement test is done for a cummulative cash generating unit.

Hence in the above , carrying value of unit is to be compared with fair value of the unit i.e. 1094 to be compared with 1028 and impairment loss to be written off is 66.

tangible assets 84

Goodwill755-66= 689

patent Nil

Customer lis- NIL

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