Reference no: EM132940519
Question - Clark Corp. has $30 million of goodwill on its book from the 2010 acquisition of Bix Ltd. Clark owns 100% of Bix, and records Bix assets at historical cost.
At the end of 2016 fiscal year, the annual goodwill impairment test reveals the following information:
Fair value of Bix less cost-to-sell = $790 million
Book value of Bix next assets (including the goodwill of $30 million) = $850 million
Present value of estimated future cash flows from Bix's operations = $800 million
Requirement 1 - Prepare the journal entry for impairment loss that Clark Corp. should recognize according to IFRS in 2016. Show necessary calculation. For this journal entry, if it is necessary, use the name "identifiable assets" to represent all the identifiable assets of Bix that need impairment.
Requirement 2 - During the fiscal year 2017, the depreciation expense related to Bix Assets was $80 million. This depreciation would have been $82 million if there was no impairment in the previous year. Because of a sudden change in government regulation, Clark corp. makes the following assessments at the end of fiscal year 2017:
- Fair value of Bix less cost-to-sell = $760 million
- Present value of estimated future cash flows from Bix's operations = $750 million
Prepare the journal entry to record any impairment loss or impairment loss reversal in 2017. For this journal entry, if it is necessary, use the name "identifiable assets" to represent all the identifiable assets of Bix that need impairment.