Case 12-9 Rough Waters Ahead Smooth Sailing is a private company that operates one cruise ship. Smooth Sailing’s purchase of the cruise ship was financed with nonrecourse debt. (Nonrecourse debt is a loan that is secured by a pledge of collateral‚ in this case the cruise ship‚ but for which the borrower is not personally liable. If the borrower defaults‚ the lender can seize the collateral‚ but the lender’s recovery is limited to the collateral.) The cruise ship has its own identifiable cash flows
Premium Generally Accepted Accounting Principles Loan Debt
Case 12-9 Rough Waters Ahead - IFRS 1. Cruise Ship belongs to the assets that apply to IAS 36 Impairment rule IAS 36-2 states the Impairment of Assets rule shall be applied in accounting for the impairment of all assets‚ other than: a) Inventories b) Assets arising from construction contracts c) Deferred tax assets d) Assets arising from employee benefits e) Financial assets that are within the
Premium Generally Accepted Accounting Principles Discounted cash flow
Becca Stone Research in Financial Reporting 10-22-12 Case 12-9: Rough Waters Ahead 1. How should Smooth Sailings’ management perform the recoverability test for the cruise ship as of December 31‚ 2010? a. What assets and liabilities should be included in the “asset group” as defined by ASC 360-10 for purpose of performing the recoverability test? i. FASB ASC paragraph 360-10-35-23 states that for measuring an impairment loss‚ long-lived assets should be group with other
Premium Generally Accepted Accounting Principles Inventory Asset
Required: 1. How should Smooth Sailings’ management perform the recoverability test for the cruise ship as of December 31‚ 2010? The following are the required steps to identify‚ recognize and measure the impairment of a long-lived asset (group) to be held and used: * Indicators of impairment — consider whether indicators of impairment are present. * Test for recoverability — If indicators are present‚ perform a recoverability test by comparing the sum of the estimated undiscounted
Premium Depreciation Discounted cash flow Generally Accepted Accounting Principles
TrueBlood Case – Rough Waters Ahead 1. How should Smooth Sailings’ management perform the recoverability test for the cruise ship as of December 31‚ 2010? In addressing this question‚ consider: The following are the required steps to identify‚ recognize and measure the impairment of a long-lived asset (group) to be held and used: Step 1: Indicators of impairment — FASB ASC 360-10-35-21 “A long-lived asset (asset group) shall be tested for recoverability whenever events or changes in circumstances
Premium Asset Goodwill Generally Accepted Accounting Principles
MEMO To: Smooth Sailing From: The consulting group Date: May 6‚ 2012 ------------------------------------------------- Subject: Recoverability/Impairment of cruise ship ------------------------------------------------- Facts: Smooth Sailing is a private company that operates one cruise ship. Smooth Sailing’s purchase of the cruise ship was financed with nonrecourse debt. The cruise ship has its own identifiable cash flows that are largely independent of the cash flows of other asset groups
Premium Generally Accepted Accounting Principles Asset Goodwill
Case study: Rough Waters Ahead 1. Assuming Smooth Sailing uses US GAAP to prepare its financial statements‚ how should Smooth Sailings’ management perform the recoverability test for the cruise ship as of December 31‚ 2010? In addressing this question‚ consider: a. What assets and liabilities should be included in the asset group" for purposes of performing the recoverability test? Ans.: According to FAS 144.41‚ "Component of an entity" describes operations and cash flows that can be clearly
Premium Generally Accepted Accounting Principles Discounted cash flow
Everyone knows the age old expression‚ “if you want something done right‚ you will do it yourself”. This couldn’t be more true in the case of Joe Kurmaskie‚ in his essay Rough Road Ahead: Do Not Exceed Posted Speed Limit‚ he learns this lesson the hard way. Armed with all the necessary equipment and knowledge he needs he foolishly takes “travel advice from a collection of old timers”. Another valuable piece of advice for joe could have been “stick to what you know” but the old men seemed “so sure
Premium Debut albums English-language films Road
Readers are introduced to a cyclist‚ who seems to enjoy exploring around with his bicycle‚ however after one adventure‚ things take a rocky turn. Author‚ Joe Kurmaskie‚ starts of his passage‚ Rough Road Ahead: Do Not Exceed Posted Speed Limit‚ However‚ he follows it up by changing up the saying‚ "Never accept travel advice from a collection of old-timers who haven’t left the confines of their porches since Carter was in office" (Kurmaskie)‚ giving the readers a feel that the story will be about traveling
Premium Water Drinking water English-language films
Background Smooth Sailing is a private company that operates one cruise ship. Recently‚ pirate activity in the area where the cruise ship operates has increased‚ thus affecting the cruise ship’s potential future cash flows. The cash flow decline has directly contributed to a decline in the overall fair value of the cruise ship. Smooth Sailing has determined three possible options for its future‚ along with the probabilities of occurrence and estimated cash flows (ECF): 1. Continue operating
Premium Generally Accepted Accounting Principles Depreciation