- This case addresses three different financial statement areas—inventory, fixed assets, and bonds payable—in addition to goodwill. The valuation of these accounts potentially impacts the amounts used in the goodwill impairment calculation.
For inventory, information about lower-of-cost-or-market adjustments can be found in ASC 330-10-35-1A through ASC 330-10-35-7. For fixed assets, impairment testing guidance is located in ASC 360-10-35-15 through ASC 360-10-35-36. Finally, information related to bond amortization and subsequent measurement can be found in ASC 835-30-35-1 through ASC 835-30-35-4. - Three decisions
(1) Determine the reporting units: ASC 350-20-35-34 indicates that a component of an operating segment can be considered a reporting unit.
(2) Determine the type of impairment test to use: ASC 350-20-15-4 highlights an Accounting Alternative for private companies and, thus, a key decision becomes whether the company that is testing goodwill is a publicly traded or privately held company.
(3) Perform quantitative impairment test: ASC 350-20-35-31 and 35-32 state that, when other assets are tested for impairment at the same time as goodwill, the other tests must be performed first. Due to the guidance in ASU 2017-04, and the implementation period that extends until 2020 for public companies and 2022 for private companies, companies have to decide whether they will adopt the guidance early, an option allowed by ASU 2017-04. - The present values of bonds payable at 12/31/2019 are 8,346,000 and 5,980,000 for SK and Joy, respectively.
- Please use the following link in order to access to Accounting Standards Codification (ASC). http://aaahq.org/Research/FASB-GARS
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