Kingston corporation has 95 million of goodwill on

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85. Kingston Corporation has $95 million of goodwill on its books from the 2011 acquisition of Reliant Motors. At the end of its 2013 fiscal year, management has provided the following information for its required goodwill impairment test ($ in millions): Assuming that Reliant is considered a reporting unit for U.S. GAAP and a cash-generating unit for IFRS, the amount of goodwill impairment loss that Kingston should recognize according to U.S. GAAP and IFRS, respectively, is: A. Option a B. Option b C. Option c D. Option d U.S. GAAP: Since the book value of Reliant exceeds fair value, there is an impairment loss. The implied fair value of goodwill is $55 million, the difference between the fair value of Reliant of $655 million and fair value of net assets excluding goodwill of $600 million. The loss is then $40 million, the $95 million book value of goodwill less the implied fair value of $55 million. IFRS: The impairment loss is $30 million, the difference between book value of Reliant of $700 million and the recoverable amount of $670 million. The recoverable amount is the greater of fair value less costs to sell ($655 million) and the present value of estimated future cash flows ($670 million).
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AACSB: Analytic AACSB: Diversity AICPA BB: Global Blooms: Apply Difficulty: 3 Hard Learning Objective: 11-08 Identify situations that involve a significant impairment of the value of property; plant; and equipment and intangible assets and describe the required accounting procedures. Learning Objective: 11-10 Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #85 Topic: Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of PP & E and intangible assets Topic: Identify situations that involve a significant impairment of the value of PP & E and intangible assets and describe the required accounting procedures 86. According to International Financial Reporting Standards, the revaluation of equipment when fair value exceeds book value, results in: AACSB: Diversity AACSB: Reflective Thinking AICPA BB: Global Blooms: Understand Difficulty: 2 Medium Learning Objective: 11-10 Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of property; plant; and equipment and intangible assets. Spiceland - Chapter 11 #86 Topic: Discuss the primary differences between U.S. GAAP and IFRS with respect to the utilization and impairment of PP & E and intangible assets
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