income. 4. Go to the SEC site (www.sec.gov). Under \"Filings &Forms,\" click on
ID: 2813938 • Letter: I
Question
income. 4. Go to the SEC site (www.sec.gov). Under "Filings &Forms," click on "Search for Company Filings." Click of "Company or fund, etc." Under Company Name, enter "Kroger Co."(or under Ticker Symbol, enter "KR"). Select the 10-K filed March 29, 2011. a. What is the goodwill account on the balance sheet? b. What is the balance on goodwill at January 29, 201 1 and January 30, 2010? c. Determine the goodwill impairment charge for 2010, 2009 and 2008? d. Determine the details for the impairment charge in 2009. Why the change? e. Why is the goodiwill impairment charge an adjustment to reconcile net earnings to net cash provided by operating activities?Explanation / Answer
Hello Sir/ Mam
(a) Goodwill Account :
Carrying amount as of the balance sheet date, which is the cumulative amount paid, adjusted for any amortization recognized prior to adoption of FAS 142 and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.
(b) Balance of goodwill:
29 January 2011 = $1,140m
30 January 2010 = $1,158m
(c) Goodwill impairment charge :
2010 : $18million
2009 : $1,113million
2008 : NIL
(d) Details of the impairment charge:
Based on the results of the Company’s step one analysis in the third quarter of 2009, the Ralphs reporting unit in Southern California was the only reporting unit for which there was a potential impairment. In 2009, the operating performance of the Ralphs reporting unit was significantly affected by the economic conditions at the time and responses to competitive actions in Southern California. As a result of this decline in current and future expected cash flows, along with comparable fair value information, management concluded that the carrying value of goodwill for the Ralphs reporting unit exceeded its implied fair value, resulting in a pre-tax impairment charge of $1,113 ($1,036 after-tax). Subsequent to the impairment, no goodwill remains at the Ralphs reporting unit.
(e) An adjustment for goodwill impairment charge is required to reconcile net earnings to net cash provided by operating activities because it is a non-cash expense and hence is required to be eliminated from net earnings to drain out only the cash earnings so as to get net cash provied by operating activities.
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