Problem - Destin Corporation acquired Beltran Corporation on January 1, 2014, at a cost of $75 million. Beltran consisted of three identifiable reporting units, designated X, Y and Z. Relevant data for the acquisition are as follows:
|
Total
|
Unit x
|
Unit y
|
Unit
|
|
Identifiable
|
60,000,000
|
32,000,000
|
20,000,000
|
8,000,000
|
|
Liabilities
|
25,000,000
|
18,000,000
|
6,000,000
|
1,000,000
|
|
Fair Value of reporting unit
|
|
50,000,000
|
30,000,000
|
15,000,000
|
In addition, existing reporting unit J is expected to benefit from the acquisition, such that its fair value increases by $20,000,000. Unit J has a carrying value of $70,000,000.
Assume qualitative assessment at December 31, 2014, indicates it is more likely than not that book value exceeds fair value for all reporting units, and Destin proceeds with the qualitatively test of goodwill impairment. On December 31, 2014, the following amounts were estimated for the four reporting units:
|
Unit x
|
Unit y
|
Unit z
|
Unit j
|
|
Fair value of reporting unit
|
30,000,000
|
15,000,000
|
12,000,000
|
75,000,000
|
|
Fair value of indentifiable net assets
|
23,000,000
|
6,000,000
|
4,000,000
|
58,000,000
|
|
Book value
|
34,000,000
|
20,000,000
|
10,000,000
|
72,000,000
|
Required:
1. Calculate the total goodwill and its allocation to business units at January 1, 2014.
2. Calculate any impairment of goodwill at December 31, 2014.