Question

The following information is to be used for g) and h): Gamma uses ASPE and has two assets it is considering at its year end for impairments. The first, goodwill, was placed on the books at $200,000 five years ago and was written down due to impairment, 3-years ago, to $120,000. The second, a patent, has a cost of $176,000 and accumulative amortization of $64,000. The fair values are: goodwill $160,000; patent $80,000. The expected future net cash flows (undiscounted) for the patent are $96,000. g) Calculate the amount to be recorded as “Goodwill”. h) Calculate the net amount to be recorded as “Patent”.

Answer 1

	Carrying value	Fair value	undiscounted net cash flow	Carrying avlue
Goodwill	120000	$160,000		120000
As per ASPE impairement related to goodwill is not allowed to be reversed in subsequent years.)
Patent	112000	$80,000	$96,000	$80,000
	(176000-64000)
( for patent the carrying value $112000 is less than undiscounted net cash flow $96000 so we will compare
carrying value $112000 with fair value $80000 and we will record an impairement loss if $112000> $80000
which is the case)
answer
	Goodwill	Patent
Carrying value	120000	$80,000
If any doubt please comment