ABC Manufacturing Corp. is a private company that operates three manufacturing facilities. Each manufacturing facility produces one of the three product lines ABC sells. ABC purchased the facilities using nonrecourse debt. (Nonrecourse debt is a loan that is secured by a pledge of collateral, in this case the facility, but for which the borrower is not personally liable. If the borrower defaults, the lender can seize the collateral, but the lender's recovery is limited to the collateral.) Each facility is independent of the others and operates as an autonomous part of the overall company.

Because of increased competition one product line has suffered a significant decline in sales. The manufacturing facility producing this product line has seen its operating performance decline significantly, which has directly contributed to a decline in its overall fair value. In the current year (2020), the affected manufacturing facility's annual operating cash flows have declined by 30 percent to $15 million, and its annual operating cash flows are expected to continue to decline in the near term. Because of this decline in the facility's fair value and operating performance, ABC's management is evaluating the following possible options for proceeding into 2021 and beyond:

• Option A - continue operating the facility in the same manner
• Option B - continue operating the facility but shift production to other two product lines
• Option C - For 2021, operate facility in the same manner.On December 31, 2021, turn the facility back to the lender (foreclosure) unless it is sold prior to end of year.(ABC does not expect to be able to sell the facility because of its location)

Estimated Future Cash Flows - Undiscounted

OptionProbability20212022202320242025Total

A20%$15M$12M$10M$7M$5M$49M

B30%$7M$8M$10M$15M$20M$60M

C50%$15M$0$0$0$0$15M

These events indicate that the carrying amount of the asset group may not be recoverable and, therefore, ABC will test the asset group for recoverability and potential impairment in accordance with ASC 360-10 as of the end of the current fiscal year, December 31, 2020.

As of December 31, 2020, the facility's estimated fair value is $52 million, net book value is $58 million, and estimated remaining useful life is five years. In addition, the net carrying value of the nonrecourse debt is $45 million and there is $2 million of networking capital (carried at fair value) directly attributable to the facility. ABC has determined that an annual discount rate of 7 percent is appropriate.

Required:

1. What assets and liabilities make up the asset group for purpose of testing for impairment as of December 31, 2020

2. Is the asset group impaired? (Show how you determined the answer)

3. If the asset group is impaired, what is the amount of impairment loss? (Show how you determined the answer)

Provide appropriate authoritative support for positions taken.