Question

In 2019, Alliant Corporation acquired Centerpoint Inc. for $339 million, of which $59 million was allocated to goodwill. At the end of 2021, management has provided the following information for a required goodwill impairment test:Fair value of Centerpoint Inc. $ 247 millionBook value of Centerpoint’s net assets (excluding goodwill) 221 millionBook value of Centerpoint’s net assets (including goodwill) 280 millionRequired: 1. Determine the amount of the impairment loss. (Negative amount should be indicated by a minus sign. Enter your answer in millions (i.e., 10,000,000 should be entered as 10)).Impairment Loss : _______

Answer 1

Impairment loss = $280 - $247 = $33

Step-by-step explanation:

Impairment loss is the reduction in Company asset's Fair value from its book value.

2019

Centerpoint Inc.'s acquisition value = $339

Goodwill = $59

Net Asset at the time of acquisition = $280

At the end of 2021

Fair Value of Centerpoint Inc. = $247

Book value of Centerpoint Inc. = $280

Book value of Good will = $59

Book value of Net Assets = $280 - $59 = $221 (That is also given)

Impairment loss = Book value of Centerpoint Inc. - Fair Value of Centerpoint Inc.

Impairment loss = $280 - $247 = $33

This loss will be adjusted to the goodwill as follows

Goodwill Book value = $59

New goodwill (Impairment loss adjusted) = $59 - $33 = $26

Revised Book value of Centerpoint Inc. after adjustment of Impairment

Revised Book value / New value of Centerpoint Inc. = $221 + $ 26 = $247