Alomar Co., a consolidated enterprise, conducted an impairment review for each o

Question

Alomar Co., a consolidated enterprise, conducted an impairment review for each of its reporting units. In its qualitative assessment, one particular reporting unit, Sellers, emerged as a candidate for possible goodwill impairment. Sellers has recognized net assets of $1,124, including goodwill of $610. Seller’s fair value is assessed at $1,038 and includes two internally developed unrecognized intangible assets (a patent and a customer list with fair values of $236 and $82, respectively). The following table summarizes current financial information for the Sellers reporting unit:

Carrying Amt's Fair Value

Determine the amount of any goodwill impairment for Alomar’s Sellers reporting unit.

After recognition of any goodwill impairment loss, what are the reported book values for the following assets of Alomar’s reporting unit Sellers?

Tangible Assets, net________________________

Goodwill ________________________

Patents ________________________

Customer Lists ________________________

Tangible assets, net $ 196     $ 234      Recognized intangible assets, net 318     351      Goodwill 610     ?      Unrecognized intangible assets 0     318         Total $ 1,124     $ 1,038   

Explanation / Answer

Since the total carrying amount > fair value, hence result of test of impairment is positive. The goodwill is to be impaired due to potential impairment loss.

We will follow the top down approach.

a )

;

Implied value of goodwill= 1038-903= 135

Book value of goodwill=610

Impairment loss= 610-135= 475

b) The total impairment loss of 475 will be written off from the goodwill amount since it is sufficiently high to absorb whole impairment loss.

Goodwill- 135

Tangible assets will stand at the same value- 196

Patents will not be recognised.

Customer Lists will not be recognised as well but will be used only for calculation purposes.

Tangible assets, net    $ 234      Recognized intangible assets, net    351    Unrecognized intangible assets 318    Total 903    Fair value of reporting unit 1038

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