income. 4. Go to the SEC site (www.sec.gov). Under \"Filings & Forms,\" click on
ID: 2330631 • Letter: I
Question
income. 4. Go to the SEC site (www.sec.gov). Under "Filings & Forms," click on "Search for Company Filings." Click of "Company or fund, etc." Under Company Name, enter "Kroger Co." (Gr under Ticker Symbol, enter "KR"). Select the 10-K filed March 29, 2011. a. What is the goodwill account on the balance sheet? b. What is the balance on goodwill at January 29, 2011 and January 30, 2010 c. Determine the goodwill impairment charge for 2010, 2009 and 2008? d. Determine the details for the impairment charge in 2009. Why the change? e. Why is the goodwill impairment charge an adjustment to reconcile net earnings to net cash provided by operating activities?Explanation / Answer
a.)Goodwill account on the balance sheet was the brand name, the reputations established during the tenure of work by the company based on the company's customer base, client relationship. Goodwill of this company is quarterly reviewed here for any signal of impairment which may occur in the future based on the projected cash flows decided by the management.
b.) Goodwill Balance on 29 jan 2011 was $1,140 million.
c.) Goodwill Impairment Charge on :
2010- $ 18 million
2009- $1,113 million
2008- $ 0
d.) The reason for change in 2009 was that long-lived assets with a carrying amount of $92 were written down to their fair value of $44, which resulted in an impairment charge of $48.In 2009 impairment occurred due to write-off of the Ralphs division goodwill balance.
e.)Goodwill impairment charge has been created as a difference between the carrying amount of the goodwill and the fair value of divisions. Goodwill are reviewed by calculating the future ability of the company to generate cash flows. When it decrease, impairment has to be made.The projection of the cas flows in the company's goodwill impairment reviews can be affected by several factors such as inflation, business valuations in the market, the economy and market competition.Just like depreciation even though not an actual outflow of cash, goodwill imapirment charge is also an implied outflow which need to be recorded and reviewed periodically. Hence,goodwill impairment needs an adjustment in the cash flow statement for adjusting net earnings to net cash flows from operating activities
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