Case 10-2 Eagle Impairment Case Question #1 Under IFRS’ International Account Standard No.36^15 an asset must be assessed for indicators of impairment at the end of each reporting period. The information provided for the commercial building in Italy does not say whether there are is an event or change in circumstances that indicate that book value of the asset may not be recoverable. Since there is no indicator mentioned‚ one possibility would be that no investigation of impairment take place and
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Tiny has been having financial troubles and recently filed for Chapter 11 bankruptcy protection. Fuzzy is interested in Tiny’s manufacturing facility‚ location and capabilities. Tiny’s manufacturing equipment is operational; they don’t have any goodwill‚ but have some intangible assets. Since‚ Fuzzy is holding so much cash they decided to buy Tiny’s and are in the final stages of the transaction. The Company is not certain in how to use Tiny’s facilities. They will either: a. continue to use the
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the newly created accounting treatment called the “acquisition method.” It will replace of the current “purchase method” strategy effective January 1‚ 2011. The major changes in the acquisition method involve variations to fair value measurement‚ goodwill recognition‚ and non-controlling interests. Purchase method The purchase method was recommended for all business combinations as per Section 1581 of the CICA Handbook in July 2001. Under this method‚ the parent company reported the net
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incurred in the formation of a corporation. 8. Operating losses incurred in the start-up of a business. 9. Training costs incurred in start-up of new operation. 10. Purchase cost of a franchise. 11. Goodwill generated internally. 12. Cost of testing in search for product alternatives. 13. Goodwill acquired in the purchase of a business. 14. Cost of developing a patent. 15. Cost of purchasing a patent from an inventor. 16. Legal costs incurred in securing a patent. 17. Unrecovered costs of a
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842 2‚765 Instructions A) What kind of intangible assets might a health care products company have? Does the composition of these intangibles matter to investors-that is‚ would it be perceived differently if all of Merck’s intangibles were goodwill‚ than if all of its intangibles were patents? A health care company is a business enterprise with tangible assets such as land‚ land improvements‚ buildings‚ and equipment. It also has many intangible assets. Some of the most important intangibles
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Part 1: Goodwill and Discontinued Operations a) Carrying value of goodwill 24 June 2012 The carrying value of goodwill in Woolworth’s consolidated financial statements was $3221.8 Million (M) at 24 June 2012. This figure is included within ‘intangible assets’ on the consolidated balance sheet and exact amount is disclosed in the Note 11 of Notes to consolidated financial statements (Woolworths 2012‚ p 126). b) Movements in carrying value of goodwill The carrying value of goodwill at the
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Exercises and Problems –W2 E9-1 The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011. 1. Paid $5‚000 of accrued taxes at time plant site was acquired. 2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on new delivery truck. 4. Paid $17‚500 for parking lots and driveways on new plant site. 5. Paid $250 to have company name and advertising slogan
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CHAPTER 3 CONSOLIDATIONS—SUBSEQUENT TO THE DATE OF ACQUISITION Answers to Discussion Questions How Does a Company Really Decide which Investment Method to Apply? Students can come up with literally dozens of factors that should be considered by Pilgrim in making the decision as to the method of accounting for its subsidiary‚ Crestwood Corporation. The following is simply a partial list of possible points to consider. Use of the information. If Pilgrim does not monitor its own income levels
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Q1 Shiplake is preparing its financial statements to 31 March 2012. The following situation has been identified by an impairment team. Shiplake has an item of earth-moving plant‚ which is hired out to companies on short-term contracts. Its carrying amount‚ based on cost model‚ is $400‚000. The estimated fair value of this asset is only $250‚000‚ with associated costs of disposal of $5‚000. A recent review of its value in use based on its forecast future cash flows was estimated at $500‚000. Since
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impairment test. Therefore‚ companies have to be required to test goodwill and other intangible assets‚ such as goodwill‚ brand name‚ financial assets‚ and investments for potential impairment on an interim basis. We know goodwill is an important part of total value of company. If any company acquires any other company‚ goodwill would be a vital indictor to determine the acquisition value. Thus‚ impairment of intangible assets such as goodwill is extremely important for any accountant. Question 2: Which
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