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In 2019, Alliant Corporation acquired Centerpoint Inc
In 2019, Alliant Corporation acquired Centerpoint Inc. for $422 million, of which $62 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. = $330 million
Book value of Centerpoint's net assets (excluding goodwill) = 298 million
Book value of Centerpoint's net assets (including goodwill) = 360 million
Required:
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)).
2) Determine the amount of the impairment loss assuming that the fair value of Centerpoint is $392 million. (Enter your answer in millions (i.e., 10,000,000 should be entered as 10)).
Expert Solution
1.)
Value of Goodwill= Fair Value of Centrepoint Inc.- Book Value of Net assets (excluding goodwill)
= $330 million- $298 million
= $32 million
Loss on Impairment of Goodwill= Goodwill recorded- Value of Goodwill
= $62 million- $32 million
= $30 million
2.)
Impairment loss is zero because fair value of $392 million is more than book value which is $360 million.
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