On September 1, 2020, Madonna Lisa Corporation, a public company, acquired Jaromil Enterprises for a cash payment of $763,000. At the time of purchase, Jaromil’s statement of financial position showed assets of $850,000, liabilities of $430,000, and owners’ equity of $420,000. The fair value of Jaromil’s identifiable assets is estimated to be $1,080,000.

Instructions

a. Calculate the amount of goodwill acquired by Madonna Lisa.

b. Assume that the goodwill was allocated entirely to one cash-generating unit (CGU), as indicated below. The CGU’s value in use at the statement of financial position date was $3,850,000 and the fair value less costs to sell was $4,250,000. Determine if the goodwill is impaired.

                                                                        Plant A CGU
Assets (other than goodwill) ..................... $4,500,000
Goodwill ........................................................... 113,000
Total carrying value of CGU ...................... $4,613,000

c. Explain how a future reversal of impairment is accounted for under IFRS.