Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. In its annual review for goodwill impairment, Destin provides the following individual asset and liability values for each reporting unit:
|
Carrying |
Fair |
|
|
Sand Dollar |
||
|
Tangible assets |
$180,000 |
$190,000 |
|
Trademark |
170,000 |
150,000 |
|
Customer list |
90,000 |
100,000 |
|
Goodwill |
120,000 |
? |
|
Liabilities |
30,000 |
30,000 |
|
Salty Dog |
||
|
Tangible assets |
$200,000 |
$200,000 |
|
Unpatented technology |
170,000 |
125,000 |
|
Licenses |
90,000 |
100,000 |
|
Goodwill |
150,000 |
? |
|
Baytowne |
||
|
Tangible assets |
140,000 |
150,000 |
|
Unpatented technology |
–0– |
100,000 |
|
Copyrights |
50,000 |
80,000 |
|
Goodwill |
90,000 |
? |
The overall valuations for the entire reporting units (including goodwill) are $510,000 for Sand Dollar, $580,000 for Salty Dog, and $560,000 for Baytowne. To date, Destin has reported no goodwill impairments.
a. Which of Destin’s reporting units require both steps to test for goodwill impairment?
b. How much goodwill impairment should Destin report this year?
c. What changes to the valuations of Destin’s tangible assets and identified intangible assets should be reported based on the goodwill impairment tests?