Anheuser-Busch InBev (InBev) is the leading global brewer, headquartered in Belgium. Its major brands include Skol (Brazil), Labatt Blue (Canada), and Sedrin (China). Its 2008 combination with Anheuser-Busch added the Budweiser brand to its portfolio. InBev's financial state-ments are prepared following IFRS, with a December 31 year-end. The 2010 financial statements disclose €22,296 million in indefinite-lived intangibles and €1,063 million in finite-lived intangibles.
Required
Respond to each of the following assumed situations:
a. In a business combination on January 1, 2012, InBev acquires amortizable intangibles (10-year life) for €200 million. Calculate amortization expense for the year ended December 31, 2013, assuming the benefit pattern approximates 150 percent declining balance.
b. Assume that intangibles costing €40 million (10-year life), acquired on January 1,2012, are traded in an active market. InBev amortizes them by the straight-line method. On December 31,2012, the market value of these items is €45 million. One year later, new developments reduced the market value to €30 million. Prepare all journal entries related to these intangibles made under IFRS on December 31,2012 and 2013. InBev uses the revaluation approach for qualifying intangibles.
c. On December 31,2015, our impairment test produces the following information for distribution rights with indefinite lives acquired by InBev:
Carrying amount€2,000 million
Sum of undiscounted expected future cash flows2,500 million
Value-in-use1,800 million
Present value of expected future cash flows (market value)1,500 million
Calculate the impairment loss recognized under IFRS and U.S. GAAP, assuming InBev bypasses the qualitative assessment allowed under U.S. GAAP. What do you conclude about the relative impairment losses recognized under IFRS and U.S. GAAP?