Question

Baker Inc. currently follows U.S. GAAP and is evaluating whetherto switch to IFRS. Baker’s Controller is concerned that severalintangible assets on the company’s books may be impaired.

The following information relates to a specific non-goodwillintangible asset with a finite life that the company is holding fordisposal in Year 1:

•

Carrying value: $4,350

•

Present value of future cash flows (fair value): $3,520

•

Sum of undiscounted expected future cash flows: $3,975

•

Estimated costs to sell: $345

Baker is also concerned about goodwill on its books, which it isevaluating at both a reporting unit level (GAAP) and acash-generating unit level (IFRS). The following informationrelates to goodwill in Year 1:

•	Reporting Unit level:
	-	Carrying value: $915,000
	-	Fair value: $820,000
	-	Fair value assigned to assets and liabilities: $760,000
	-	Goodwill: $75,000
•	Cash-generating Unit level:
	-	Carrying value: $350,000
	-	Fair value: $325,000
	-	Costs to sell: $55,000
	-	Present value of future cash flows (equal to fair value):$325,000 1.Calculate the impairment loss on the intangible asset underGAAP 2. If the fair value exceeds the carrying value in Year 2, willa reversal be allowed under GAAP? 3. If IFRS were used, calculate the impairment loss on theintangible asset 4. Calculate the impairment loss on goodwill under GAAP 5. Calculate the impairment loss on goodwill under IFRS