Actg Essay

1104 Words Jul 7th, 2015 5 Pages
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Essay Sample
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

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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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