Actg Essay

1104 Words Jul 20th, 2015 5 Pages
Case 10-2
Eagle Impairment Loss
Eagle Company (Eagle) is a manufacturing company with operations in Italy and Serbia.
Eagle in Italy:
In addition to other assets, Eagle owns and operates a commercial building in Italy that is carried at its cost less any accumulated depreciation and any accumulated impairment losses. The building represents a cash-generating unit (CGU) for which the following information is available as of December 31, 2010:
Building
12/31/10 in thousands

Carrying amount

$1,100

Value in use


900

Fair market value less costs to sell
800

Fair market value

850

Undiscounted future cash flows
1,150

Eagle in Serbia:
In Serbia, in 2008, Eagle acquired a smaller competing company and
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In addition, external industry reports estimate no growth rate for the foreseeable future. The significant export restriction and the resulting production decrease are impairment indicators that require Eagle to estimate the recoverable amount of its operations at the end of 2010.
Eagle’s management prepared the cash flow analysis shown below:
Discounted cash flows in thousands:
2011
2012
2013
2014
Total revenue
$5,649
$6,045
$6,528
$7,181
Growth
6%
7%
8%
10%
Cost of goods sold
3,389
3,627
3,917
4,309
Gross profit
2,260
2,418
2,611
2,872
Selling, general, and administrative (SG&A)
847
906
979
1,077
Earnings before interest, taxes, depreciation & amortization (EBITDA)
1,413
1,512
1,632
1,795
Depreciation and amortization
564
604
652
718
Earnings before interest and taxes (EBIT)
849
908
980
1,077
Available tax-loss carryforwards
0
0
0
0
Net taxable earnings
849
908
980
1,077
Income taxes
296
317
342
377
Net operating profit after-tax
553
591
638
700
Add back depreciation and amortization
564
604
652
718
Subtract capital expenditures
(848)
(903)
(980)
(1,077)
Subtract…

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