Question

Mikkeli OY acquired a brand name with an indefinite life in 2015 for 44,000 markkas. At December 31, 2017, the brand name could be sold for 35,300 markkas, with zero costs to sell. Expected cash flows from the continued use of the brand are 46,200 markkas, and the present value of this amount is 34,300 markkas.

Assume that a foreign company using IFRS is owned by a company using U.S. GAAP. Thus, IFRS balances must be converted to U.S. GAAP to prepare consolidated financial statements. Ignore income taxes.

Required:

1. Prepare journal entries for this brand name for the year ending December 31, 2017, under (1) IFRS and (2) U.S. GAAP. (2 entries)
2. Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017 and December 31, 2018 conversion worksheet to convert IFRS balances to U.S. GAAP. (2 entries)

Answer 1

solwtion Ontangiblu att imfaired unden TPRS According to TAS 36 a nairnent of assets The Asset is toimad to hace been infaired, 9f tha canyin valua i mor than ecouatablo amount . n tho ghe roblem value in Use 34.300 ash flawr Cfoture, vales efected from an asit Besent vales fair value 3S, 300 therw fare gmlaired Joss 44000 hart fast 35,300 hay tay Account Htu and elaratn Dati Debit() Credt Fmfaitment oss Ale 31/2It TO byand (TO Yecand tha Yecosnitahiangy Omlais ement ofq brand)

ASset impaiy ment under u.s. GAAP Bandangible Accaxding to th Us. GAAP, an Asset is Said to be imaired, when ho canin Araunt is hapre than tha futuxa exfected cashflows ondirclored to frerent tha giuen Problem Tha eifected Calh flow gravatkd by Lం htlg the brand And cansing Arount 17 narrtal

BY obseruing aboue value's ,ue came to on conclusionthat ei fected / Cash flows ane etces than Carry amount J So, tha brand is hot imfaiyead entry is secodacl NO JOUInal

2 conuersion om TFRS to US. GAAPgolt TO Concert IPRS to 61AAP tha imbiy ment value Yecoenited by the Confany must be xeuersed ard tha Canyin amount Of tho brand inrealod by 8t00 Martkas ho entry S i Date ACCOUM titlu and eilanatin Debit redit 31-Dec- 2014 Brand Alc 8,100 8 HOO Jmlaiyment los Conuersion sow TPRS to uS 6ABP o18 Thesw is ho nfarment Joss Uhdan tho US GIAAP, entry is veuersed by do biting th brand accountiny and Crediting tha Rotainou eanings Aclount. as follaws Account titlu and exelanation Dati 0ehit Credit Band e 3-Dec 201P gen lairment los