E4.10 Identifiable Intangibles and Goodwill, U.S. GAAP International Foods, a U.
ID: 2337390 • Letter: E
Question
E4.10 Identifiable Intangibles and Goodwill, U.S. GAAP International Foods, a U.S. company, ac quired two companies in 2019. As a result, its consolidated financial statements include the following acquired intangibles: Fair value Date of acquisition at date of Intangible asset acquisition Useful life Customer relationships . $4.000,000 8,000,000 18,000,000 500,000,000 January 1, 2019 4 years 5 years Indefinite Indefinite . . .. _. . ..June 30, 2019 Goodwifl was assigned to the following reporting units: $100,000,000 150,000,000 250,000,000 It is now December 31,2020, the end of International Foods' accounting year. No impairment losses were reported on any intangibles in 2019. Assume that International Foods bypasses the qualitative option for impairment testing of goodwill and indefinite-life intangibles. Additional information at December 3, 2020 is as follows Sum of future expected Sum of future expected discounted cash flows Intangible asset undiscounted cash flows $ 1,200,000 14,000,000 $ 900,000 4,400,000 7,000,000 Favorable leaseholds. 6,000,000 Reporting unit Unit carrying value Unit fair value $300,000,000 200,000,000 600,000,000 $400,000,000 350,000,000 500,000,000 South America . ._ __ . . . _ _ _ .. .. _ _. . . _ _ . . . Required Compute 2020 amortization expense and impairment losses on the above intangibles, following U.S. GAAP.Explanation / Answer
Answer:
Here we have to compute 2020 Amortization expense and its impairment losses,
Customer relationships,
Book value
The overall data is given below,
Amortization expenses Fair value at date of acquistion Useful life Amortization Customer relationships 4000000 4 1000000 Flavorable leaseholds 8000000 5 1600000 Total 2600000 Impairment Testing-Identifying Intangibles:Customer relationships,
Book value
4000000-2*(4000000 / 4)=2000000 2000000 AS PER THE BOOK VALUE IS GREATER THAN SUM OF UNDISCOUNTED CASH FLOW I.E 2000000>1200000:YES Book value 2000000 Less sum of future expected discounted cash flows 900000 Impairment loss 2000000-900000=1100000 Favorable leaseholds: Book value 8000000-1.5*(8000000 / 5)=5600000 5600000 AS PER THE BOOK VALUE IS LESS THAN SUM OF UNDISCOUNTED CASH FLOWS I.E 5600000<6000000; NO Brand names: Book value 18000000 HERE 1800000>7000000:YES Book value 18000000 Expected discount value 7000000 Impairment loss 180000000-7000000=11000000 11000000 Impairmnet testing-Good will Reporting unit unit FV<BV Fair value GW impairmnet loss Asia 400000000>300000000: NO South America 350000000>20000000: NO Europe 500000000<600000000: YES 115000000 135000000Related Questions
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