Please answer question 3, 4B & 5

Please answer question 3, 4B & 5


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Case 10-2
Ida’s Impairment
Ida Inc. (Ida) is a manufacturing company with operations in the
United States and Spain. As a U.S. subsidiary of a U.K. entity, Ida
prepares its financial statements in accordance with (1) U.S. GAAP
for reporting to its U.S.-based lender and (2) IFRSs in reporting to
its parent.
U.S. Operations
In addition to other assets, Ida owns and operates a commercial
building in the United States that is carried at its cost less any
accumulated depreciation and any accumulated impairment losses.
As of December 31, 2010, the building represents:

• €
A cash-generating unit (CGU) under IFRSs.

• €
A long-lived asset classified as held and used under U.S.
GAAP. In December 2010, one of Ida’s competitors sold its
commercial building for an amount significantly less than its
asking price. The competitor’s building is located across the street
from Ida’s building, has approximately the same square footage,
and was built five years after Ida’s building was constructed. In
preparing its 2010 financial statements, Ida’s management has
provided the following information regarding the building as of
December 31, 2010 (assume these values have been evaluated by
Ida’s independent auditor and found to be reliable):
Ida’s Building
12/31/10 (in
Carrying amount

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Value in use
Fair market value less cost to sell
Fair market value
Undiscounted future cash flows
Spanish Operations
In 2008, Ida acquired a smaller competing company located in
Spain, and this acquisition resulted in goodwill being recorded.
Assume that (1) the activities in Spain represent the lowest level at
which internal management monitors goodwill and (2) the Spanish
operations represent a CGU under IFRSs and a reporting unit
under U.S. GAAP.
At the end of 2008 and 2009:

Under IFRSs, the recoverable amount of the CGU, including
goodwill, exceeded its carrying amount.
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Case 10-2: Ida’s Impairment Page 2

Under U.S. GAAP, the fair value of the reporting unit, including
goodwill, exceeded its carrying amount.
Therefore, the goodwill allocated to the Spanish operations was
regarded as unimpaired.
At the end of 2010, the newly elected government passed
legislation significantly restricting exports of Ida’s main product.
The information below relates to the CGU/reporting unit of Ida’s
Spanish operations before the impairment analysis.
Carrying Value of Ida’s Spanish Operations Before Impairment Analysis

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