Philip Kim
ACC - 4251
Prof. Vijay P Kumar
9/15/2011
Case 10-2

Objective: To find if there is an impairment on goodwill. ASC 350-20

Alternative 1: No impairment

Alternative 2: Impairment

Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value ASC 350-20-35-2
In 2008 Ida acquired a smaller competing company located in Spain. Led to goodwill.
The Spanish operations a cash-generating unit under IFRSs and a reporting unit under U.S GAAP.
At the end of 2008 and 2009 the recoverable amount of the CGU including goodwill, under IFRSs exceeded its carrying amount.
Under U.S GAAP, the fair value of the reporting unit, including goodwill, exceeded its carrying amount.
End of 2010 the Spanish government passed a legislation that significantly restricted exports of Ida’s main products.
As of December 31, 2010:
Value in use of CGU is $2.1 million
Present value of future cash flows from CGU/reporting unit is $2.0 million, represents fair value
Fair value of PP&E is $3.1 million
Cost to sell the CGU would be $100,000
The remaining useful life of Ida’s identifiable assets is 6 years beginning of 2010.

The first step of the goodwill impairment test, compare the fair value of the reporting unit with its carrying amount, including goodwill.
ASC 350-20-35-4
If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. ASC 350-20-35-6 - Fair Value ($2.0 million) - carrying amount ($2.5 million) and goodwill ($300,000) = $800,000