Explanation:
A. Incorrect because the amount of the impairment charge due to goodwill is less than that of licenses. The goodwill impairment charge for 20X2 in dollars = 73,194 - (65,321 + 7,324) = 549. B. Correct because licenses will have the largest dollar impairment charge on the income statement due to the size of the implied impairment charge, which is calculated as: Accumulated impairment losses and amortization as of 31 December Year 1- (Accumulated impairment losses and amortization as of 31 December Year 1+ Exchange movements + Amortization charge for year + Net Additions (Disposals)). In this case the largest impairment loss that will be reported is due to licenses. Impairment charge due to licenses = 10,856 - (8,243 + 821 + 1,244 - 25) = 573 C. Incorrect because the amount of the impairment charge due to computer software is less than that of licenses. The computer software impairment charge for 20X2 in dollars = 8,214 - (5,257 + 334 + 2,102) = 521.
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A technology company, reporting under US GAAP, has three classes of intangible assets. The table below shows information on each of the three classes (in USD thousands):
| Goodwill | Licenses | Computer Software | |
|---|---|---|---|
| 31 December of Year 1 | 65,321 | 8,243 | 5,257 |
| Exchange movements in Year 2 | 7,324 | 821 | 334 |
| Amortization charge for Year 2 | — | 1,244 | 2,102 |
| Net additions (disposals) in Year 2 | — | (25) | — |
| 31 December of Year 2 | 73,194 | 10,856 | 8,214 |
Based on the data provided, the intangible asset that has the largest absolute impairment charge for the period ended 31 December of Year 2 is:
A
goodwill.
B
licenses
C
computer software.
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