Eagle Impairment

In: Business and Management

Submitted By aryasadigh
Words 654
Pages 3
The case begins with describing Eagle impairment, which is a manufacturing company, which has operations in Italy and Serbia. In Italy Eagle owns and operates a commercial building that is carried at its cost less depreciation. The case then gives us a chart which shows us Cash generating unit that includes: carrying amount $1,100, value in use 900, fair market value less costs to sell 800, fair market value 850, and undiscounted future cash flows 1,150 all in thousands.
Eagle’s manufacturing company in Serbia attained a smaller competing company. The activities in Serbia are regarded as not impaired because the value in the use of CGU including goodwill exceeds its carrying amount. By the end of 2010 the govt passed a legislation drastically restricting exports of eagle’s main merchandise. The CGU in the end of 2010 was altered because of the new legislation, which included: cash $50, property plant and equipment 1,100, land 150, goodwill 300, total assets 1,600, liabilities (200), and carrying value 1,400 all in thousands.
The case goes on to show us a 5 year business forecast of Eagle Impairment. It reflects an increase in the amount of capital expenditures in order to modify Eagle’s mail product. Eagle uses straight line depreciation and anticipates no residual value.
1. I assume the commercial building meets the requirements for a recoverable test under IFRS. The carrying value is $1,100 whci is greater than the claue in use which is $900. The fair market value less costs to sell is $800. The impairment is found by subtracting the carrying amount by the value in use which comes out to $200,000, which should be recognized as an impairment under the IFRS.
2. In GAAP is mandatory if a building’s book value is gretater than the undiscounted sum of assets future cash flow. In this case there is no impairment loss because the carrying value is $1,100…...

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