Case 10-2 Eagle Impairment Loss

Eagle Company (Eagle) is a manufacturing company with operations in Italy and Serbia.

Eagle in Italy:

In addition to other assets, Eagle owns and operates a commercial building in Italy that is carried at its cost less any accumulated depreciation and any accumulated impairment losses. The building represents a cash-generating unit (CGU) for which the following information is available as of December 31, 2010:

Building	12/31/10 in thousands
Carrying amount	$1,100
Value in use	900
Fair market value less costs to sell	800
Fair market value	850
Undiscounted future cash flows	1,150

Eagle in Serbia:

In Serbia, in 2008, Eagle acquired a smaller competing company and goodwill was allocated to the CGU shown below. Activities in Serbia represent the lowest level at which internal management monitors goodwill. At the end of 2008 and 2009, the value in use of the CGU including goodwill exceeded its carrying amount. Therefore the activities of Eagle in Serbia and the goodwill allocated to those activities were regarded as not impaired.

However, at the end of 2010, the newly elected government passed legislation significantly restricting exports of Eagle