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Eagle Impairment Loss

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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 inthousands | 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 goodwill was allocated to the CGU shown below. Activities in Serbia represent the lowest level at which internal management monitors goodwill. At the end of 2008 and 2009, the value in use of the CGU including goodwill exceeded its carrying amount. Therefore the activities of Eagle in Serbia and the goodwill allocated to those activities were regarded as not impaired.

However, at the end of 2010, the newly elected government passed legislation significantly restricting exports of Eagle’s main product.

The information below relates to the CGU (which includes goodwill) of Eagle’s operations in Serbia before the impairment analysis is performed. For this case, assume the basis of segmentation for CGUs and reporting units (RU) is the same under IFRSs and U.S. GAAP. Eagle’s Serbian CGU carrying value | 12/31/10in thousands | Cash | $50 | Property, plant, and equipment (PP&E) | 1,100 | Land | 150 | Goodwill | 300 | Total assets | $1,600 | Liabilities | (200) | Carrying value | $1,400 |

As a result of the change in legislation, Eagle’s production will be significantly affected for the foreseeable future. In addition,…...

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