Question

WebHelper Inc. acquired 100% of the outstanding stock of Silicon Chips Corporation (SCC) for $45 million, of which $15 million was allocated to goodwill. At the end of the current fiscal year, an impairment test revealed the following: fair value of SCC, $40 million; book value of SCC’s net assets (including goodwill), $42 million. What amount of impairment loss should WebHelper recognize?

Answer 1

Answer:

No impairment loss.

Explanation:

Considering SSC as the reporting unit.

The fair value of this unit shall be compared against the book value including goodwill.

Here,

Fair value = $44 million  

Book value including goodwill = $42 million.

From the above information, it was seen that fair value of SSC is greater than the book value of SSC including goodwill.

Hence, there should be no impairment loss recognized by the WebHelper.