Question
Fresh Look Products Ltd. (FLP) is a global manufacturer of beauty products, including makeup, skin care, and hair care products. FLP follows IFRS and has
Fresh Look Products Ltd. (FLP) is a global manufacturer of beauty products, including makeup, skin care, and hair care products. FLP follows IFRS and has a December 31, Year 10 year end. The accounting staff is currently working to complete the year-end adjustments. Edward MacKellar works as an accounting assistant to Suzanne Zhang, the Chief Financial Officer.
FLP currently owns a trademark for its womens makeup line called Clever Cover, which was purchased 10 years ago and was expected to have a finite life of 15 years in the U.S. market. However, a new direct competitor has launched and with the increase in demand for organic products, the company believes that the value of this trademark may be impaired, given that Clever Cover is not organic. FLP also has goodwill related to its Mens Facial Products (MFP) division. The goodwill needs to be tested annually for impairment and as revenues for the division have been declining due to a dwindling market share, there is indication that the recoverable amount of the division may be less than its carrying value. The following documents have been provided: Appendix I: Extract of current general ledger accounts as at December 31, Year 10 Appendix II: Memo from the marketing department regarding the trademark Clever Cover Appendix III: Email from the finance department regarding the MFP division
Appendix II: Memo from the marketing department regarding the trademark Clever Cover MEMO To: Suzanne Zhang, Chief Financial Officer From: Lawrence McTaggart, Marketing Manager Re: Clever Cover trademark In reviewing this trademark and future sales of this product, we have determined that its fair value less costs of disposal is $3,600,000. The value in use based on forecasts is $2,800,000. Appendix III: Email from the finance department regarding the MFP division Subject: Mens Facial Products division TO: Suzanne Zhang; Edward MacKellar FROM: George Jeyakumar, VP Finance At your request, we have calculated the following for the cash-generating unit of the Mens Facial Products division, as at December 31, Year 10. 1. Fair value less costs of disposal $8,650,000 2. Value in use $10,800,000 Nothing came to our attention to indicate that any specific asset in the division is impaired. Recoverable amounts of individual assets in the division could not be determined. Thanks, George
Question:
Appendix I: Extract of current general ledger accounts as at December 31, Year 10 amortization and accumulated depreciation accounts for finite life assets. The impairment loss for the Clever Cover trademark can... never be reversed. 1 Select your answer The impairment loss for the goodwill related to the MFP division can... never be reversedStep by Step Solution
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