On 1 January 2012, Bad Ltd acquired all the assets and liabilities of Wolf Ltd. Wolf Ltd has several operating divisions, including one whose major industry is the manufacture of toy trains, particularly those of historical significance. The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired goodwill of $240 000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date. On 31 December 2014, the carrying
On 1 January 2012, Bad Ltd acquired all the assets and liabilities of Wolf Ltd.
Wolf Ltd has several operating divisions, including one whose major industry is the manufacture of toy trains, particularly those of historical significance.
The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired
The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date.
On 31 December 2014, the carrying amounts of the assets of the toy train division were:
|
Factory |
$250 000 |
|
Inventory |
$150 000 |
|
Brand — ‘Froggy’ |
$50 000 |
|
Goodwill |
$50 000 |
|
Total |
500 000 |
There is a declining interest in toy trains because of the aggressive marketing of computer-based toys, so the management of Bad Ltd measured the value in use of the toy train division on 31 December 2014, determining it to be $423 000.
Required:complete the following
The carrying amount of the assets of the Toy Train Division is xxx. If the recoverable amount is xxx, then there is an impairment loss of xxx
The impairment loss is firstly used to write off the goodwill - xxx. The balance of the loss - xxx – is allocated across the other assets, except for inventory assuming it is recorded at the lower of cost and net realisable value:
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Carrying Amount |
Proportion |
Allocation of Loss |
Net Carrying Amount |
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Factory |
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Brand |
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The
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Dr |
Impairment loss |
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Cr |
Goodwill |
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Cr |
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Cr |
Accumulated amortisation and impairment losses –brand |
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(Allocation of impairment loss) |
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