Question 1

On May 1, 2011, Walker Company (a US company) paid US$4,500,000to acquire all of the common stock of Hayden Corporation (an Australian company), which now became a division of Walker. Hayden reported the following US$ balance sheet at the time of the acquisition:

Book Value $

Fair Value $

Current Assets

900,000

1,500,000

Noncurrent Assets

2,700,000

2,300,000

Current liabilities

(600,000)

(700,000)

Long-term liabilities

(500,000)

(400,000)

At December 31, 2011, Hayden reports the following US$ balance sheet information:

Book Value $

Fair Value $

Current Assets

700,000

800,000

Noncurrent Assets (excluding Goodwill)

1,200,000

1,300,000

Current liabilities

(600,000)

(700,000)

Long-term liabilities

(500,000)

(400,000)

During the annual impairment test conducted on December 31, 2011, it was determined that the fair value of the Hayden division as a whole was$2,800,000.

Required:

(a)Compute the amount of goodwill recognized, if any, on May 1, 2011.

(b)Determine the impairment loss, if any, to be recorded on December 31, 2011.

(c)Determine the implied fair value of goodwill on December 31, 2011.

(d)On the assumption that the fair value ofHayden on December 31, 2011was$1,950,000instead of$2,800,000,determine the impairment loss, if any, to be recorded.

Question 2

(a) In 2017, there was an Accounting Standards Update which aimed to simplify the test for Goodwill Impairment. Briefly summarize the main provision(s) of this update, and please include the effective date.

(b) How would your answer to Question 1, part (d) change if you were basing it on the 2017 Accounting Standards Update?