CUDIA Inc: Case Study: Claadia Inc.
Goodwill for Impairment
CLAUDIA Inc. has an internally generated goodwill and did not amortize or tested for impairment. They cannot amortize because measuring the components are complex and associating the costs incurred with future benefits are too difficult. Goodwill cannot generate cash flows independently and is made as a combination with other assets making up a business; it needs to be assigned to a reporting unit or cash-generating unit in order to test for impairment. Under ASPE, the impairment test is applied when events or changes in circumstances indicate it. Under IFRS, the impairment test is applied annually and whenever there is an indication that the cash-generating unit may be impaired.
CLAUDIA Class B Common Shares price undetermined Class B common shares were issued by Jeffrey to raise funds and preserve our cash reserves in order to purchase some needed computer technology. The first issue with this is that Jeffrey has no authority as COO to be offering partial ownership of CLAUDIA. Although these shares are likely to be non-voting, it would be been more strategic to take out another small loan or a corporate line of credit to obtain capital to …show more content…
When all development costs were incurred as expenses, it would drag down the net income of the business and the total assets will be smaller. This would affect the debt-to-equity ratio reaching closer to the specified maximum ratio allowed in the current year. However, profitability can be boosted in the long term if there are no other development costs incurred in the near future. With capitalizing under historical cost model, it would allow the business to generate higher net income by incurred amortization based on useful life of the intangible asset and will increase the total asset of the
CLAUDIA Inc. has an internally generated goodwill and did not amortize or tested for impairment. They cannot amortize because measuring the components are complex and associating the costs incurred with future benefits are too difficult. Goodwill cannot generate cash flows independently and is made as a combination with other assets making up a business; it needs to be assigned to a reporting unit or cash-generating unit in order to test for impairment. Under ASPE, the impairment test is applied when events or changes in circumstances indicate it. Under IFRS, the impairment test is applied annually and whenever there is an indication that the cash-generating unit may be impaired.
CLAUDIA Class B Common Shares price undetermined Class B common shares were issued by Jeffrey to raise funds and preserve our cash reserves in order to purchase some needed computer technology. The first issue with this is that Jeffrey has no authority as COO to be offering partial ownership of CLAUDIA. Although these shares are likely to be non-voting, it would be been more strategic to take out another small loan or a corporate line of credit to obtain capital to …show more content…
When all development costs were incurred as expenses, it would drag down the net income of the business and the total assets will be smaller. This would affect the debt-to-equity ratio reaching closer to the specified maximum ratio allowed in the current year. However, profitability can be boosted in the long term if there are no other development costs incurred in the near future. With capitalizing under historical cost model, it would allow the business to generate higher net income by incurred amortization based on useful life of the intangible asset and will increase the total asset of the