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AMMRC Incorporated (AMMRC Inc

Accounting

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AMMRC Incorporated (AMMRC Inc.), is a U.S. manufacturer of greenhouses. AMMRC Inc. sells the greenhouses online through its website.

On January 1, 2016, AMMRC Inc. purchased 100% of TLTJ (TL), a U.S. corporation located throughout the U.S. as well as DJJS Company (DJ), a U.S. closely held corporation located on the West Coast. AMMRC Inc. originally recorded $1,850,000 of goodwill on its consolidated balance sheet, with $1,300,000 and $550,000 related to TL and DJ, respectively.

The New Segment

TL manufactures polycarbonate sheets and panels. The sheets and panels have great transparency and are virtually unbreakable. The sheets and panels are used in construction of AMMRC Inc.’s greenhouses and are sold through its website to other manufacturing companies and to individual consumers. DJ manufactures heavy-duty greenhouse shelves. A line of its shelves was modified to fit AMMRC Inc.’s greenhouses. DJ also manufactures shelves that are sold to other manufacturing companies and to individual consumers.

Before purchasing DJ, AMMRC Inc. purchased the shelves from a foreign company. AMMRC Inc. experienced unreliable vendor services and shipment of the product from the foreign company; the product usually arrived two or more weeks past the promised delivery date. Upon the purchase of TL and DJ, AMMRC Inc. formally established a new segment, Greenhouse Parts and Accessories, for financial reporting purposes.

Goodwill

AMMRC Inc. developed a policy that requires all reporting units to formal quantitative impairment tests of goodwill every five years, beginning with the financial statements for fiscal year 2021. Prior to 2021, AMMRC Inc. concluded each year that a formal quantitative goodwill impairment test was not required.

AMMRC Inc. prepared to test all of it reporting units. In conjunction with these tests, AMMRC Inc. noted that several fixed-asset groupings within Greenhouse Parts and Accessories experienced significant declines in market value, and thus the segment personnel would be testing all fixed-asset groupings for impairment. AMMRC Inc. hired a large consulting firm that specialized in corporate valuation to conduct appraisals that are necessary for the goodwill impairment testing process. Its appraisal reports highlighted December 31, 2021, fair values in the amounts of $11,000,000 and $1,800,000 for TL and DJ, respectively. AMMRC Inc. is confident that all of the other assets and liabilities were reported at appropriate amounts that approximated fair values.

 

Additional information for impairment testing is found in the attached “Goodwill Impairment Data.”

 

 

REQUIREMENTS

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Your submission must be your original work. No more than a combined total of 30% of the submission and no more than a 10% match to any one individual source can be directly quoted or closely paraphrased from sources, even if cited correctly. The similarity report that is provided when you submit your task can be used as a guide.

A.  Research the FASB Accounting Standards Codification Topic 350 (ASC 350) standards for goodwill impairment using the “FASB Accounting Standards Codification Database” web link, then summarize the relevant ASC 350 standards and components (including topic, subtopic(s), section(s), and subsection(s)) to do the following:

1.  Describe the treatment for when a company has similar economic characteristics.

2.  Describe the treatment for when a company does not have similar economic characteristics.

3.  Describe the treatment for a public company.

4.  Describe the treatment for a private company.

5.  Describe the treatment for when a company elects the accounting alternative.

6.  Describe the treatment for when a company does not elect the accounting alternative.

7.  Describe the treatment for when a company has a triggering event occur.

8.  Describe the treatment for when a company does not have a triggering event occur.

 

B.  Using the scenario, the attached “Goodwill Impairment Data,” and the research completed for part A, determine the best approach for AMMRC Inc.’s treatment of goodwill impairment while justifying your decision on each of the following decision points:

•  whether the company has similar economic characteristics

•  whether the company is public or private

•  whether the company elects the accounting alternative

•  whether the company has a triggering event occur

1.  Determine the goodwill impairment loss, if required, for TL and DJ corporations based on the information provided in the attached “Goodwill Impairment Data” and appropriate authoritative guidance (ASC 350). If goodwill impairment loss is not required, explain why.

 C.  Acknowledge sources, using APA-formatted in-text citations and references, for content that is quoted, paraphrased, or summarized.

 D.  Demonstrate professional communication in the content and presentation of your submission