Eagle Impairment Case

Eagle Impairment Case
Question 1
IFRS
According to the facts provided for Eagle in Italy, we assume that the commercial building, which represents a cash-generating unit (CGU), meets the requirement for a recoverable test under IFRS. The impairment loss is required when the building’s book value exceeds the higher of the asset’s value-in-use and fair value less costs to sell.

Carrying value 1,100 > 900 Higher of Value in use (900) Fair market value less costs to sell (800)

Impairment Loss is the difference between book value and the recoverable cost (the higher of the asset’s value-in-use and fair value less costs to sell).

Carrying value 1,100 – 900 Higher of Value in use (900) Fair market value less costs to sell (800)

Eagle should recognize an impairment loss of $200,000.

Question 2
U.S. GAAP
In this case, we make the same assumption that the building Eagle owned in Italy needs a recoverable test because of events or changes in circumstances indicate that book value may not be recoverable. Under U.S. GAAP, the impairment loss is required when the building’s book value exceeds the undiscounted sum of the asset’s estimate future cash flows. Carrying value 1,100 < 1,150, the undiscounted future cash flows
There is not impairment loss since the sum of undiscounted estimated future cash flows exceeds the book value.

Question 3. 1
Because the new fair value PP&E is $1,000,000, which is less than the original book value of PP&E, $1,100,000. We need to do the revaluation of PP&E.
Journal entry:
Revaluation loss 100,000 PP&E 100,000
The new book value of the net assets of $1,300,000 (50k+1,000k+150k+300k-200k)
IFRS