Question: 1. On January 1, 2015 RG Corp, a public company, purchased all of the outstanding stock of HA Inc. paying $2900 ($million) cash. At the end of 2015, significant labor cost increases have resulted in sustained declining cash flows for the HA reporting unit and RG projects that revenues for the HA reporting unit will be significantly less than anticipated. Additional information is a follows ($million):
Fair Value of HA (per appraisal) $1,800
Fair Value of HA's net assets (excluding goodwill) $1600
Book Value of HA's net assets (including goodwill) $2,300
Book value of HA's net assets (excluding goodwill) $1,700
Present Value of HA's estimated future cash flows $2,000
- How often does GAAP require RG Corporation to evaluate the goodwill regarding impairment? What is meant by the "qualitative test for impairment"?
- What values, if any, will be reported for impairment loss on the income statement and goodwill on the balance sheet under US GAAP at 12/31/15? (label the steps)
- What values, if any, will be reported as impairment loss on income statement and as goodwill on the balance sheet under IFRS at 12/31/15 If HA is considered a cash generating unit? (show steps)
- Discuss the subsequent meansurement alternative that would be available under US GAAP if RG Corporation was a private company?