Question
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2,
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units:
| Carrying Amounts | ||||
| RU-1 | RU-2 | RU-3 | ||
| Tangible assets | $212,000 | $240,000 | $186,750 | |
| Trademark | 190,000 | |||
| Customer list | 151,500 | |||
| Unpatented technology | 234,500 | |||
| Licenses | 136,000 | |||
| Copyrights | 58,500 | |||
| Goodwill | 155,600 | 195,450 | 98,500 | |
| Liabilities | (42,000) | |||
The total fair values for each reporting unit (including goodwill) are $647,100 for RU-1, $770,200 for RU-2, and $742,100 for RU-3. To date, Purchase has reported no goodwill impairments.
How much goodwill impairment should Purchase report this year for each of its reporting units?
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units:
| Carrying Amounts | ||||
| RU-1 | RU-2 | RU-3 | ||
| Tangible assets | $212,000 | $240,000 | $186,750 | |
| Trademark | 190,000 | |||
| Customer list | 151,500 | |||
| Unpatented technology | 234,500 | |||
| Licenses | 136,000 | |||
| Copyrights | 58,500 | |||
| Goodwill | 155,600 | 195,450 | 98,500 | |
| Liabilities | (42,000) | |||
The total fair values for each reporting unit (including goodwill) are $647,100 for RU-1, $770,200 for RU-2, and $742,100 for RU-3. To date, Purchase has reported no goodwill impairments.
How much goodwill impairment should Purchase report this year for each of its reporting units?
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Accounting For Managers Interpreting Accounting Information For Decision Making
Authors: Paul M. Collier, Sandy M. Kizan, Eckhard Schumann
1st Canadian Edition
1118037960, 9781118037966
