Question

The Sparkle Ltd. Company has a trademark that it expects to have an indefinite life with a carrying value of $1,500,000. As part of its 2018 annual impairment testing, Sparkle decides not to use the qualitative assessment option under U.S. GAAP and moves forward to performing its quantitative assessment impairment testing for both U.S. GAAP and IFRS. In this process, it is determined that the fair value of the trademark is $1,200,000. The present value of the future cash flows is $1,260,000 and the undiscounted summation of the future cash flows is $1,400,000. The costs to sell the trademark would be insignificant.

a. Determine the impairment of the trademark using both U.S. GAAP and IFRS.

Answer 1