Question: Determination of Implied Fair Value using the FASB ASU 2017-4 standard
ID: 2556117 • Letter: Q
Question
Question: Determination of Implied Fair Value using the FASB ASU 2017-4 standards. I achieved the below calculations using the current standards but am not sure how to go about it using the update.
Fair Value of assets including Goodwill $445 Million
(Fair Value of Assets excluding Goodwill) ($425 Million)
=Implied Fair Value of Goodwill $20 Million
Measurement of Impairment Loss:
Book value of Goodwill $125 Million
(Implied Fair Value of Goodwill) ($20 Million)
=Impairment Loss $105 Million Journal Entry for Impairment Loss:
Date Dec 31 Impairment loss on Goodwill Debit $105,000,000
Goodwill Credit $105,000,000
Journal Entry
Date Dec 31 Impairment loss on Goodwill Debit $105,000,000
Goodwill Credit $105,000,000
1.Based on the information above can early adoption of the FASB ASU 2017-4 standards update be used if so determine the amount of goodwill impairment loss using the data above and if applicable prepare the journal entry and indicate how the impairment should be reported on the income statement, balance sheet and cash statement
2.According to FASB ASU 2017-4, what would be the financial note disclosure?
Explanation / Answer
1. Early adoption is permitted for interim or annual impairment test on goodwill after January 1st,2017.
2. The calculation of goodwill impairment used here is based on implied fair value basis rather the update suggest a new method of identifying the goodwill. The update suggest calculation of goodwill impairment using Carrying Amount of reporting unit against fair value of reporting unit.
3. Disclosure requirement :Changes in the carrying amount of goodwill should be disclosed showing separately the opening gross amount and accumulated impairment loss with during the year transactions and closing impairment loss and carrying amount.
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