Textbook Notes (290,000)
CA (170,000)
UTSG (10,000)
Chapter

RSM221H1 Chapter Notes -Current Liability, Write-Off, John Wiley & Sons


Department
Rotman Commerce
Course Code
RSM221H1
Professor
Scott Douglass

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Ninth Canadian Edition
PROBLEM 12-6
(a) Fair value of consideration transferred $2,000,000
Less fair value of identifiable net assets 1,700,000
Goodwill $300,000
(b) The fair value of Lubello Division of $1,850,000 exceeds
the carrying amount of the division including goodwill of
$1,628,500. As a result, no impairment is recognized.
(c) The carrying value of the division of $1,628,500 exceeds
the fair value of $1,500,000, therefore goodwill is
considered impaired by $128,500.
(d) Loss on Impairment of Goodwill 128,500
Goodwill 128,500
The loss would be reported separately in the income
statement before taxes and discontinued operations.
(e) Under IFRS, the goodwill is allocated to cash generating
units (CGU). An assessment for impairment is required
annually and whenever circumstances indicate the CGU
may be impaired. An impairment loss is determined as the
excess of the CGU’s carrying amount over its recoverable
amount (higher of VIU and FV-SC). Any impairment is first
allocated to goodwill and then to other assets in the CGU
on a proportional basis. A reversal of goodwill is not
permitted.
Solutions Manual 12-1
Chapter 12
Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Ninth Canadian Edition
PROBLEM 12-7
a) Goodwill calculation
Fair value of consideration
transferred $763,000
Fair value of assets $1,080,000
Fair value of liabilities 430,000
Fair value of net assets 650,000
Value assigned to goodwill $113,000
b) The recoverable amount of the CGU is compared with the
carrying value to determine if there is any impairment.
Based on the information provided, the recoverable amount is
the higher of:
-FV – selling costs = $4,250,000
-VIU = $3,850,000
Recoverable amount of CGU 4,250,000
Carrying value of CGU 4,613,000
Impairment loss 363,000
c) The impairment loss of $363,000 exceeds the amount of
goodwill. Therefore, the impairment loss should be allocated to
reduce the CGU’s carrying amount in the following order: the
carrying amount of goodwill first reduced and any excess
should then go to reduce the carrying amount of other assets on
a pro-rata basis.
Solutions Manual 12-2
Chapter 12
Copyright © 2010 John Wiley & Sons Canada, Ltd. Unauthorized copying, distribution, or transmission of this page is strictly prohibited.
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