Question

Header Q1. (25 marks) Calculation of and journal entries for impairment of goodwill Gandach Corporation purchased a division five years ago for $ 3 million. The division has been identified as a reporting unit that is cash-generating under IFRS. Management is reviewing the division for impairment of goodwill and has estimated the fair value of the reporting unit to be $ 3.2 million and the unit's value in use to be $ 3.3 million. In addition, there would be $ 75,000 in direct costs should the company decide to sell. The carrying amounts of the division's net assets, including the associated goodwill of $ 1,350,000, are listed below. Carrying amount of Net Assets including Goodwill Cash $ 300,000 Receivables 450,000 Inventory 1,050,000 Property, plant, and equipment (net) 1,200,000 Goodwill 1,350,000 Less: Accounts and notes payable 750.000) Net assets, at carrying amounts $3.600.000 Instructions Determine if goodwill is impaired and provide the related journal entries, if any, under both ASPE and I IFRS

Answer 1

Carrying amount Summasiged the information and data e provided in the question; Gardaph coopis purchased a division 5 yrs ago for $3m * Determining if Goodwill is impaired and providing the Journal Entries, ander both ASPE & IFRS ; As per ASPE: "When corsrying amount of reporting unit more than faisvalue of reporting unit then impartment is don; $ 36,00,000 fair value $ 31,25,000 . Caroying amount > fair value. .. So, impaioment to be done. Impairment loss = 36,00,000 - 31,25,000 $ 4,75,000 > But impairment loss of CGO (cash generating unit (00) -seporting cinit) doesn't exceed the value of Goodwill. JOORNAL ENTRY © loss of impairment on goodwill tile D6 4.725,000 To goodwill alc (Peing entry for impartment loss) 4775,000

As per IFRS 7 fais value of reporting unit $3.2 million $75,000 direct cost to sell) fair value (3.2 million-- $75,000) fait value $ 31,95,000 -> value in use of Reporting unit 433 million (3.3% 10.00,000) value in use $ 33,00,000 → Higher amount faitvalue and value inuse is recoverable amount. Recoverable amount {$31,25,000 &33,000039 So, secoverable amount 33,00,000 - Caroying amount of Reporting unit $ 36,00,000. o when carrying amount of asset is more than the recoverable amount of asst the asset is to be imparted.' Caroying Recoverable amount amount Recoverable amount amount 36,00,000 -33,00,000 $ 3,00,000. Şo, impcioment loss - Carolyong

- - Impartment loss frost to adjust ③ with Goodwill Goodwill 13,50,000 Impartment loss = 3,00,000 - Goodwill offer impairment= 13,50,000- 3,00,000 = 10,50,000$ Journal Entry O loss of impaloment on goodwill Alc 06 300,000 To goodwill alc 3,00,000 Being entry for impartment loss Please please kindly Up-vote Thank you