A2 Auto Corporation

Date: March 31, 2010

Prepared by: Joe Expert Senior

Reviewed by: Manager XWZ CPA Adam Smith

ISSUE: Grouping of long-lived assets to be held and used for impairment testing purposes.

BRIEF BACKGROUND OF HISTORY
A2 Auto Corporation (“A2 Auto”) is one of the world’s largest manufacturers and distributors of automobiles and automobile ancillary parts. In its Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”), A2 Auto has disclosed within Note 24, Segment Information, that it has four operating segments: (1) A2 Americas, (2) A2 Asia Pacific, (3) A2 Others, and (4) Financial Services. Note 12, Goodwill and Other Intangibles, disclose that A2 Auto has the same four reporting units.

ACCOUNTING QUESTIONS 1. What are the appropriate criteria for the grouping of long-lived assets to be held and used for impairment testing purposes? 2. On the basis of the information in A2 Auto’s 2010 Form 10-K, what is the appropriate grouping for purposes of recognizing and measuring an impairment loss? 3. What audit considerations should be made when testing the appropriate grouping of long-lived assets for purposes of recognition and measurement of an impairment loss? 4. Is A2 Auto’s approach for testing goodwill for impairment after recognizing an impairment charge related to a long-lived asset group classified as held-and-used appropriate? 5. After the A2 Americas $1.76 billion impairment loss was recognized, strategy refocus effort began which has resulted in an improved forecast for the Americas segment going forward. Should A2 Auto consider restoring the previous carrying amounts of these long-lived assets?

SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS 1. In general, assets should be grouped when they are used together, that is, when they are part of the same group of assets and are used together to