What is the amount of the impairment loss on the trademark

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Entity previously purchased for P4,000,000 a trademark for a very successful coffee drink it markets under the name Cofiormi. The trademark was determined to have an indefinite life. A competitor recently introduced a product that is in direct competition to Cofiormi, thus suggesting the need for an impairment assessment. Data gathered by the entity suggest that the useful life of the trademark is still indefinite, but the net cash flows generated by the trademark have been reduced either to P150,000 annually, with a probability of 80%, or to P300,000, with a probability of 20%. The appropriate risk-free rate is 6%. The appropriate risk-adjusted interest rate is 10%.

Problem 1: What is the amount of the impairment loss, if any, on the trademark?

Reference no: EM132785710

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