are the two proper accounting treatments regarding tangible assets and goodwill as well as the effects of these treatments. Impairment exists when the carrying amount of an asset exceeds its fair value and the impairment loss is the difference between the carrying value and fair value of that asset. The impairment test rules applied to impairment of property, plant, and equipment are different from those used in measuring goodwill. For tangible assets to be held and used, a recoverability test is performed
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each customer’s need. ABC Company recognizes that your company has questions related to adjusting lower cost of market inventory on valuation, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment. Inventories of companies are recorded at cost, except when the inventory declines in value below its original cost. When the cost declines below the original cost the company should write down the inventory to report this loss.
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Chapter 01 - Intercorporate Acquisitions and Investments in Other Entities Chapter 01 Intercorporate Acquisitions and Investments in Other Entities Multiple Choice Questions In order to reduce the risk associated with a new line of business, Conservative Corporation established Spin Company as a wholly owned subsidiary. It transferred assets and accounts payable to Spin in exchange for its common stock. Spin recorded the following entry when the transaction occurred: 1. Based on the preceding
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Italian operation: Donna acquired an Italy company in 2010 and goodwill was recorded. The Italy operation represents a cash-generating unit (CGU) under IFRSs and a long-lived asset classified as held and used under U.S. GAAP. Information about the Italy operation before impairment analysis is as follows. Carrying Value Before Impairment Analysis 12/31/12 ($’000) Cash 50 Property, plant, and equipment (PP&E) 3,000 Land 150 Goodwill 300 Total assets 3,500 Liabilities (1,300) Carrying value
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under GAAP. 3. Part 1 IFRS Under IFRS, “A cash-generating unit to which goodwill has been allocated shall be tested for Impairment annually, and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit. If the recoverable amount of the unit exceeds the carrying amount of the unit, the unit and the goodwill allocated to that unit shall be regarded as not impaired. If the carrying
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Case 10-2 Eagle Impairment Case Question #1 Under IFRS’ International Account Standard No.36^15 an asset must be assessed for indicators of impairment at the end of each reporting period. The information provided for the commercial building in Italy does not say whether there are is an event or change in circumstances that indicate that book value of the asset may not be recoverable. Since there is no indicator mentioned, one possibility would be that no investigation of impairment take place and
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attained. Please provide the requested information based on these following four areas: adjusting lower of cost or market on valuation, capitalizing interest on building construction, recording gain or loss on disposal of an asset, and adjusting goodwill for impairment. Following is a detailed explanation of each of these four areas and an explanation of their importance in fair value of a business. Lower of Cost or Market Lower of cost or market is one approach for inventory valuation that may
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| | | | ($75,000 + $160,000) |235,000 | | |Goodwill |278,400 | | | Intangible Assets
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find listed under non-current assets any intangibles a company might have. I’ve included a copy above of The Walt Disney Company’s balance sheet as an example. It lists intangible assets and goodwill separately near the bottom of the asset section. I’ll be discussing various intangibles such as goodwill and how they are acquired, recorded and valued in accordance with both GAAP and IFRS. It’s important to have an understanding of the current differences in reporting requirements as the U.S. attempts
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Intangible Assets A. Classification--intangible assets are assets that derive their value from the rights and privileges granted to their owner, are long-term in nature, and lack physical substance B. Valuation 1. Cost--cost is the cash or cash equivalent price of obtaining the intangible asset and making it ready for its intended use a. Purchased Intangibles--the cost of a purchased intangible asset is determined in essentially the same
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