UNIVERSITY OF IDAHO M.Acct. Portfolio Advisor: Jason Porter Shawn DeSilva 4/29/2013 Table of Contents Course List ................................................................................................................................................2 Introduction .............................................................................................................................................4 Example 1 – Leadership Analysis .....................................................................................................4 Coach Leadership Analysis Memorandum Acct. 561 Example 2 – Quality Control Issues ..................................................................................................5 PCAOB Inspection Report Summary Acct. 590 Example 3 – Variance Analysis ..........................................................................................................6 Case Study: Franklin Health Associates Acct. 586 Example 4 – Extended Technical Definition .................................................................................6 Assignment #3: Writing to Define Eng. 317 Example 5 - Revenue Recognition of Multiple Element Arrangements .............................7 Minor Assignment #2: Case Study 12-4: Hemo-Tech Inc. Acct. 592 Example 6 – Goodwill Impairment Analysis .................................................................................7 Case Study: Enervate Inc. Acct. 515 Conclusion ................................................................................................................................................7 Appendix ...................................................................................................................................................9 1|Page Course List Course # Course Name Eng. 317 - Technical Writing 3 n/a Proper Use of Technical Formatting in Written Communication Understanding of Professional Grammar/Writing Principles Acct. 440 - Fraud Examination 3 A Knowledge of Various Investigations Regarding Financial Earnings Management and Corporate Fraud Schemes Understanding of Detection Techniques/Preventative Measures Acct. 497 - Practicum in Tutoring 1 Solidified Basic Accounting Concepts and Principles Ability to Mentor and Teach a Peer Effectively A Acct. 503 - Work Shop: Accounting Professional Development 1 Professional Employment Techniques & Resume Building A Acct. 503 - Work Shop: CPA Exam Review 1 n/a Extensive Understanding of CPA Exam Topics/Concepts Time Management and Commitment to Long-Term Projects Acct 515 - Advanced Financial Accounting/Reporting 3 n/a Advanced Understanding of Financial Accounting Concepts and Treatments such as Impairment, Lease Accounting, Derivatives, Partnerships, Subsidiaries, Revenue Recognition, Etc. Ability to Research FASB Standards and Codification System in order to Interpret Findings and Prescribe a Recommendation Acct. 530 - Accounting/Public Sector Entity 3 B Advanced Understanding of Auditing Standards/Procedures for Governmental and Not-For-Profit Entities General Understanding of Accounting Principles and Bookkeeping Used By Governmental and Not-For-Profit Entities Acct. 561 - Comparative Accounting Theory 3 A Critical Thinking of Various Accounting Theories and Application Ability to Effectively Communicate Complex Accounting/Ethical Issues through Written Communication Advanced Understanding of Critical Issues Regarding IFRS Convergence, History of Accounting/Standard Setters, and Fundamental Issues Facing the Accounting Profession 2|Page Credits Grade Acct. 586 - Contemporary Management Accounting Issues 3 A Effective Oral Communication and Presentation Skills Ability to Communicate Realistic Accounting Issues and the Respective Accounting Treatment to Hypothetical Clients Ability to Create and Implement Effective Master Budget and Professional Reports Regarding Case Analysis’ Acct. 590 - Advanced Auditing Seminar 3 n/a Critical Thinking of Advanced Audit Concepts/Situations such as Financial Meltdown and Corporate Fraud Conceptual Understanding and Application of Substantive and Analytical Auditing Procedures Fundamental Understanding of Auditor’s Role, Importance of Independence within an Engagement, and High Demand of Professional Judgment within the Profession Acct. 592 - Financial Accounting/Reporting Seminar 3 n/a Knowledge of Advanced Accounting Transactions such as Derivatives, Consolidations, Impairment of Intangible Assets, and Partnerships. Ability to Determine Appropriate Accounting Treatment and Procedure Based on Realistic Case Studies Acct. 598 - Internship 3 A Performed Audit Procedures during Engagements of Both Private and Not-For-Profit Entities. Ability to Complete and File Basic Tax Forms such as Form 1040, Form 1040EZ, Form 990 Proficient in both ProFX Tax Preparation and Audit Engagement Software 3|Page M.Acct Portfolio Paper Introduction Throughout my time in the Master of Accountancy Program at the University of Idaho, I have been given the opportunity to learn and develop a number of professional skills that I will be able to utilize in all my future professional endeavors and aspirations. The three professional skills that I believe have mastered through the courses I have taken this year and have offered the most opportunity to improve my ability to function and succeed as a professional accountant are 1.) Critical Thinking, 2.) Written Communication and 3.) Accounting Research. I personally believe that these three professional skills are an essential requirement for any CPA to be successful within the accounting profession and business world. The primary professional skill that I believe was the most important fundamental attribute that was developed throughout the course of the year and offers the most long-term benefits is the ability to critically think and conceptualize problems facing the accounting profession. I believe this is the most important skill that I took away from the Master’s program because this professional skill was tested, reshaped, and was required to be mastered effectively in order to be successful in essentially every course I had. The second professional skill I believe I was able to master over the course of academic year was the ability to communicate through writing. The professional skill of written communication is a necessity to any professional’s skillset regardless of what role they hold in a company. If someone is in a management position or even a bottom level employee the ability to communicate through writing is a required trait of anyone who wishes to be successful in any profession. The final professional skill that I have developed and was able to master through the various academic courses I have taken is the ability to not only research various accounting principles and codification but also apply those findings to realistic client-based situations. This professional skill is extremely important to any accounting practioner regardless of field of study. Whether a professional accountant specializes in tax, audit, or consulting, it is especially important that the practioner has the ability to research, interpret, and apply the appropriate accounting treatment to each individual client’s independent situation. Professional Skill #1: Critical Thinking To illustrate how I have was able to improve and develop the professional skill of critical thinking I have chosen two primary examples from my academic course work. The first example was chosen from Accounting 561, Comparative Accounting Theory, this example demonstrates my ability to critically dissect complex issues and analyze them at their true basis. The second example I chose to demonstrate is how I was able to translate my critical thinking skills from Accounting 590 and apply them to Advanced Auditing Seminar. This example demonstrates my ability to analyze accounting literature and identify/summarize the most critical and influential issues. 4|Page Example 1: Leadership Analysis Memorandum In this specific example, we were asked to compare the leadership styles of Coach Bobby Knight v. Coach K and how they apply to various leadership theories. Based on our findings we were then asked to create a recommendation to our manager through a memorandum. In order to compare the leadership styles of each coach, I first had to determine which specific leadership styles identified with each coach by analyzing a variety of different factors such as reputation off the court, success as a coach, ability to lead a community, primary differences between coaching methods, professional judgment, etc. Based on the factors I was able to critically evaluate each coach and determine the appropriate leadership styles accordingly. Before I could match each coach with their respective leadership style, I first had to critically think about and evaluate each coach’s life and personally identify with their actions, decision, and judgment. In regards to toning and developing my critical thinking skills, I believe this example really taught me how to delve deeper into significant factors and essentially think outside the box in order to find the appropriate solution. For more information regarding the Leadership Analysis example, please see Figure 1 of the Appendix. Example 2: Quality Control Issues – PCAOB Inspection Report I also chose to demonstrate the development of my critical thinking skills in the Master’s Program through an assignment given to us in Accounting 590. In this assignment we were asked to choose a public accounting firm and summarize any significant findings illustrated by the PCAOB Inspection Report of the respective firm. The specific section I chose to summarize related to the Quality Control Issues. I believe this section especially demonstrates my ability to critically think about accounting concepts. Despite the abundance of quality control issues in this case I was required to use critical thinking to identify and separate the significant issues that possessed substance from the other less important issues. The ability to utilize critical thinking skills to separate influential and significant issues from an abundance of information is a key attribute that is required of all practioners in order to be successful within the accounting profession. For more information regarding the Inspection Report Summary example, please see Figure 2 of the Appendix. Professional Skill #2: Written Communication To describe how I was able utilize the academic course work offered through the Master’s Program to build my written communication skills, I have chosen two examples from assignments I have completed over the course of the year. The first example I chose to illustrate my writing ability is an assignment from Accounting 586, Contemporary Management Accounting Issues. For this assignment we were asked to generate a cost analysis regarding various product lines and based on this analysis develop a recommendation in regards to the specific accounting treatment. We were also required to explain these findings in a manner that our fictitious client could clearly understand. For the second example, I chose a passage from an assignment I completed for English 317, Technical Writing, because it demonstrate how I was able to grasp the most technical and 5|Page professional writing techniques/formats and implement them within my writing projects. Regardless of whether you are Managing Partner or Accounting Intern, being able to properly use professional writing techniques and principles such as proper salutation, formatting of various business documents, and technical/grammatical competence is a required qualification for any accounting professional. Example 3: Variance Analysis Case Study The first example that I believe was able to hone my writing ability the most and had the greatest impact on my written communication skills was an assignment that asked to create analysis of variances amongst various product lines in order to prescribe a recommendation to a fictitious client. This assignment helped improve my written communication skills immensely by teaching me how to translate complex accounting jargon into an understandable language that clients can easily comprehend and grasp. This is very important to the success of being a future accountant because whether it is bookkeeping, auditing, tax, or consulting, accounting is a service profession. If a client is unable to understand our findings or misinterprets our recommendation then they will be unhappy with the service we have provided them and will eventually take their business elsewhere to another firm that can better satisfy their service needs. For more information regarding the Variance Analysis example, please see Figure 3 of the Appendix. Example 4: Extended Technical Definition For the second example of how I was able to improve my writing skills through various coursework, I have chosen an assignment that requires communicating an extended technical definition of a complex term that applies to our field of study to a non-technical audience. For the complex term that applies to my field of study, I chose the term ‘audit engagement’ to write my extended technical definition for a non-technical audience, which is an audience that has no prior knowledge or understanding of the term being defined. This example demonstrates how I was able to improve my writing ability by learning how to take a complex and technical concept and break it down to its most basic components, by doing this I learned how to clearly translate the concept through writing in clear manner to an audience with no previous understanding. This professional skill is also a fundamental tool in a practioner’s skillset because it allows CPA’s to explain complex tax treatments or advanced accounting principles to clients who lack the understanding required to be knowledgeable with such issues. For more information regarding the Extended Technical Definition example, please see Figure 4 of the Appendix. Professional Skill #3: Accounting Research The third professional skill that I believe I have been able to develop and have seen significant improvement throughout this year is the ability to effectively research through accounting standards and literature. Because the accounting profession is always evolving and monumental changes are being made on a consistent and frequent basis, it is very important that accounting practioners possess the means of keeping up with all new updates and exposure drafts that are continuously being released by the accounting 6|Page standard-setters. The first example I chose to demonstrate how I was able to improve my ability to research accounting concepts and issues effectively was a Case Study assigned in Accounting 592, Financial Accounting and Reporting Seminar, regarding the specific accounting treatment of the revenue recognition for multiple-element arrangement based on the standards found in FASB’s Accounting Standard’s Codification database. The second example I chose to represent the improvement of my ability to research was a Case Study from Accounting 515, Advanced Financial Accounting and Reporting, that required using accounting research to find the treatment of potential impairments on goodwill for three separate subsidiaries. Both of these examples illustrate how I was able to utilize accounting research to effectively locate, interpret, and apply the appropriate accounting treatment for two separate accounting issues. Example 5: Revenue Recognition of Multiple Element Arrangements Case Study The example of the assignment that had the most influence on my ability to research accounting articles and standards was the case study that required determining the specific accounting treatment for the recognition of revenue for a multiple element arrangement under US GAAP using the Accounting Standards Codification system. Although this was not my first time using the ASC database, this assignment did demonstrate that if used correctly the ASC database can be an extremely effective tool to quickly and efficiently find the appropriate treatment for an accounting problem or issue. This type of professional skill may not be used as frequently by accounting professionals as critical thinking or written communication but it does serve a vital purpose for professionals by saving them valuable time. In the accounting profession time is money, when it comes to a tax, audit, or any other accounting-related dilemma it pays to be able to streamline the process by using the ASC database to find the appropriate solution. Example 6: Goodwill Impairment Analysis Case Study The final example I chose to demonstrate the mastering of my professional skills, specifically the ability to effectively utilize accounting research, is a case study regarding an analysis of the potential impairments on goodwill using the ASC database to determine the appropriate accounting treatment under US GAAP. In order to determine the exact value of impairment for the goodwill of each subsidiary, I first had to identify the appropriate accounting standard to apply to the given situation in order to ensure that the final outputs of my excel worksheet were accurate and reliable. By using the ASC system, I was able to improve my ability to locate specific accounting treatments as well as my ability to apply the respective treatment to a given situation and determine the correct accounting values under US GAAP. Being able to interpret and apply US GAAP according to ASC standards is as important to an accounting professional as being able to simply use and locate the standards using the codification database. This is a vital skill for an accounting professional to possess, because if an accountant is only able to locate the appropriate GAAP but is unable to interpret the application correctly then the ability to provide a reliable and professional service to the client significantly diminishes. 7|Page Conclusion In conclusion, although I believe I have attained a number of professional skills through my time here at the University of Idaho, the three primary professional skills that I believe I have mastered through the Master of Accountancy Program are 1.) Critical Thinking, 2.) Written Communication, and 3.) Accounting Research. Through these professional skillsets I will be able to increase my chances of being successful within my career as a fully functional accounting professional. Critical Thinking is a fundamental attribute to the success of any accounting practioner, it is a skill that is literally required to be used in almost any situation a professional will face. Considering the amount of writing the accounting profession requires, being able to communicate complex transactions, tax treatments, or other accounting issues to clients or management is an extremely beneficial and useful asset for future accountants to possess. If I continue to effectively use accounting research I will be able to solve complicated accounting predicaments by directly locating the appropriate solution quickly and efficiently. By continuing to utilize and build on these professional skills, I believe I will be able to not only accomplish my professional goals but also continue to grow as an accounting profession. 8|Page Appendix Figure 1: Coach Leadership Analysis Memorandum – Acct. 561 After extensive research on the career of Coach Krzyzeweski, commonly known as Coach K, we immediately identified him with the ethical leadership theory. Some of the primary characteristics that indicated him as an ethical leader were that he was not just a phenomenal leader on the court; he was also able to capture the hearts and spirits of the entire university and community around him. An important factor of being an ethical leader is not only making ethical decisions but promoting ethical behavior in those around you. By leading by example, Coach K was able to extend his leadership and ethical behavior to areas outside the court, i.e. classrooms, boardrooms, conferences, even acted as a personal advisor to the University’s President. One of the primary contributors to Coach K’s success as leader is that he possesses “emotional intelligence,” which is the ability to manage oneself and their relationships effectively through the use of self-awareness, self-management, social awareness, and social skills. Because of his emotional intelligence, Coach K is fully aware of his role as a leader and acknowledges his responsibility to not only hold himself accountable for his actions but for the actions of his team as well. Coach K has stated, “I don’t want to be a manager or a dictator. I want to be a leader – and leadership is ongoing, adjustable, flexible, and dynamic.” (Snook 2005a, p. 3) Truly effective leaders are able to “switch amongst leadership styles as conditions dictate to create the best organizational climate and optimize business performance.” (Goleman 2000, p. 2) Although my team and I determined that Coach K does utilize numerous leadership styles, the style we thought he used the most was an “affinitive leadership style” which requires creating harmony and building emotional bonds with the people around you. The relationships Coach K created on and off the court were built with love, trust and an unspoken mutual respect for one another. He instilled a feeling of a family bond amongst not only the players he coached but also within the community he lived. My team and I believe a perfect example of this family bond was captured in a conversation shared between Coach K and his wife at the time of their third daughter being born. Mrs. Micki Krzyzeweski asked her husband if he had been disappointed upon receiving his third baby girl opposed to his first son, and his response was simple, “No, I already have 15 sons.” (Snook 2005a, p.8) 9|Page Figure 2: PCAOB Inspection Report Summary – Acct. 590 Quality Control Issues In addition to the Board’s three deficiencies they found within the Firm’s audit work, they were also able to identify several issues related to their quality control system. One of the primary issues that the Board identified as a significant issue facing their quality control system was the lack of “technical competence, due care, and professional skepticism.” This issue is related to the Firm’s inability to delve deeper into their audit engagements and truly assess managements reasoning behind the number they report on their financial statements. If the Firm’s audit partner’s used more technical competence, due care, and professional skepticism within their engagements, then they could prevent these deficiencies from reoccurring in the future. The other problem the Board identified as a significant quality control issue was the Firm’s “concurring partner review,” which is the procedure of having a another partner reviewed by a professional competent reviewer. According to the inspection team, they have found no evidence that the current procedure used by the Firm‘s concurring partner review has resulted in any identification of any of the deficiencies found by the Board’s inspection team. Essentially, the Board suggests that implementing a more extensive concurring partner review by increasing the level of due care and professional skepticism within their audit work and engagements they will decrease the amount of deficiencies and quality control issues as well. Overall, based on the Board’s inspection of the Firm’s audit work and quality control system they have come to the conclusion that “the Board has concerns that Firm’s system of quality control fails to provide such reasonable assurance” that is required by professional standards. It is also important to remember that although the Board recognizes these significant deficiencies within the Firm’s audit work and quality control system, these deficiencies are in no way any indication that any failure in the Firm’s audit procedure lead to an “insufficiently supported audit opinion.” Which means although the PCAOB found a number of deficiencies within the Firm, it does not necessarily mean those deficiencies lead to a false unqualified opinion within any of their audit engagements. 10 | P a g e Figure 3: Variance Analysis - Case Study: Franklin Health Associates – Acct. 586 Dear Mr. Barber: As you have requested, my team and I have generated a cost analysis regarding the four different lines of pens your company produces. For our cost analysis, my team and I chose to use an activity based costing system in order to accurately allocate overhead amongst the four separate lines of pens, this costing method will give us a more realistic presentation of how each pen line individually affects your company’s bottom line. Before we could truly analyze each pen color, we first had to determine which operating activities to allocate overhead amongst. Under Appendix A, you can see that the four primary activities we chose to use were Machine Hours, Productions Runs, Setup Time, and Parts Administration, after determining each activity we then allocated all overhead expenses accordingly. Using the drivers given by your company, we were then able to calculate the applied overhead cost per driver for each of the activities. By applying the overhead rate to each activity we were able to determine the approximate amount of overhead to allocate to each pen. Finally after determining the amount of overhead to allocate to each line we were able to create an Income Statement, displayed in Appendix B, to truly compare the amount of return each color of pen was individually producing. Due to rounding error, some of the values below are slightly off, but regardless they are still able to give us the necessary information to make a solid recommendation. After thorough analysis, we were able to gather enough conclusive data to make a reliable recommendation to you and the other members of the Board of Directors. Based on the cost analysis of each line of your pens, my team and I have recommended that Classic Pen Company should discontinue the Red and Purple lines of pens you are producing. As you can see in our Appendices’, both the Red line and Purple line possess a negative return on sales and cost significantly more to produce than your Black and Blue lines of pens. The Purple and Red lines are negatively impacting your bottom line and it is in your company’s best interest to terminate their production immediately. 11 | P a g e Figure 4: Extended Technical Definition - Writing to Define – Eng. 317 What is an Audit Engagement? An audit engagement is essentially a very complex and extensive review of all financial statements of public companies, public meaning they are traded on the stock market, as required by the Federal Government’s Sarbanes Oxley Act of 2002. Because audit engagements are a federal requirement for all public companies and is in fact their responsibility to make sure an audit is conducted on their financials, audit engagements are one of the primary services offered through accounting firms in order to find new clients and retain existing ones. The ‘engagement’ portion of the term audit engagement primarily refers to the mutual agreement that must be legally established between the principal, the public company, and the agent, the auditing firm, prior to conducting any audit procedures. Both the principal and the agent must agree on the responsibilities of both parties during the audit engagement, the timeliness of the engagement (how long it will last), and the total cost of the audit to the principal. At any point during the audit engagement, if either the agent or principal does not meet the agreed upon terms of the ‘engagement’ or agreement, then depending on the situation and reason of disagreement each party is granted the ability to withdraw from that engagement and seek out an alternative solution through litigation or other legal means. How is an Audit Engagement Conducted? The first initial step in beginning any audit engagement starts with a meeting with a public client in order to discuss the terms of the engagement such as responsibilities, timing, costs, and the extent at which their company must be audited based on their respective level of risk. An auditor will assess the level of risk of a public company based on the likelihood of that company becoming insolvent, or essentially bankrupt. The more debt a company uses to leverage themselves the higher the level of risk they will be associated with, for a company that has no debt their level of risk would be very low and would not require as extensive of an audit as a company with a significant amount of debt and a high risk rating. It is very important to establish the extent of an audit prior to actually conducting it because the higher level of risk means a more extensive audit which means a higher cost to conduct the audit resulting in a higher charge to the public company at the end of the engagement. After all terms of the engagement are agreed upon and both parties have signed the necessary documents, a team of auditors will actually travel to the company being audited and being conducting the necessary audit procedures. These types of procedures are not limited to bank confirmations, physical inventory counts, management inquiry, statistical analysis of various transactions, and even recalculation of the financial statements. After the auditing team has conducted all the necessary procedures and finished testing the financials, based on their results they will make an opinion on the integrity of the financials stating that they are “presented fairly in all material aspects.” Each opinion vouches for the integrity of a company’s financials, and is what allows investors to trust what is being presented by the company in order to make the best investment decisions for themselves and the economy. 12 | P a g e Figure 5: Revenue Recognition of Multiple Element Arrangements – Acct. 592 Based on ASC 605-25-30-2, Hemo-Tech needs to apply the relative selling price method to each of the three deliverables in order to be in compliance with the code. Under the relative selling price method, Hemo-Tech will determine their selling price of their deliverable using the Vendor-Specific Objective Evidence ( if it exists), if not available, Hemo-Tech must use Third-Party Evidence to determine the selling price of the deliverable. If neither venderspecific objective evidence or third-party evidence exist then Hemo-Tech will use the Best Estimate of Selling Price to determine the selling price of that deliverable. Deliverable 1: Equipment For the first deliverable of Equipment, I believe Hemo-Tech should utilize the ‘Best Estimate of Selling Price’ in order to determine the correct selling price of the equipment. Because Hemo-Tech does not know the price of their equipment they cannot use VSOE, and because neither of their competitors sell to similar equipment to similar customers they cannot use TPE either. Based on ASC 605-25-30-6C, because there are other competitors out there selling similar models Hemo-Tech must make sure that their selling price is consistent with their competitors. Also, because Hemo-Tech has the capability to accurately assess their costs of manufacturing, materials, labor, R&D, and also have access to past data regarding their competitor pricing and markups, Hemo-tech can make a fairly reliable estimate regarding equipment’s selling price based on its standalone basis. The values required to calculate what the standalone basis of the equipment is can be determined by assessing the costs of manufacturing and competitor markups. Deliverable 2: Discount on Future Supplies For the second deliverable, Discount on Future Supplies, I believe Hemo-Tech should utilize the ‘Vendor Specific Objective Evidence’ to determine the correct selling price of the deliverable. Based on ASC 605-25-30-6A, “Vendor-specific objective evidence of selling price is limited to… the price charged for a deliverable when it is sold separately.” Since HemoTech sells the supplies separately for $3,000 per box, this is the selling price at which they must report the discount on future supplies deliverable at, as required by ASC 605-25-30-6A. Deliverable 3: Screen and Report Services For the third deliverable, Screen and Reported Services, I believe Hemo-Tech should utilize ‘Third Party Evidence’ to determine the correct selling price for this deliverable. Because Hemo-Tech cannot determine a price if they deliverable was sold separately they cannot use VSOE. Based on ASC 605-25-30-6B, “selling price is the price of the vendor’s or competitor’s largely interchangeable products or service in standalone sales to similarly situated customers.” Because Hemo-Tech has “two close competitors that provide similar service to similar customers” that can also interchangeably provide the same screen and report services for Hemo-Tech’s equipment, Hemo-Tech must report the selling price of this deliverable based on Third Party Evidence provided by their competitors. In order to meet the requirements of ASC 605-25-30-6B, Hemo-Tech must estimate its selling price of the deliverable based on the standalone basis of what their competitors sell their similar products to similar customers. Both Competitor X and Competitor Y provide services to Hemo-Tech’s equipment based on the standalone value, Hemo-Tech can use this information to determine the selling price of their Screen and Report Services. 13 | P a g e Figure 6: Goodwill Impairment Analysis – Case Study – Acct. 515 Appendix 3: ASC 350-20-35-(4-8) MacroMedia Accounts Inventory Customer List Land Copyrights Trademark Equipment (net) Goodwill Liabilities Carrying Value Fair Value $3,503,540 $3,502,140 $287,435 $267,435 $20,652 $20,652 $247,562 $247,526 $10,260 $1,750 $3,289,550 $3,289,050 $19,500 ($2,356,050) ($2,396,050) $5,022,449 $4,932,503 $5,022,449 $4,919,250 $103,199 *Move to Step 2 Step 1: Carrying Value Est. Fair Value FV IS < CV Step 2: Est. Fair Value $4,919,250 FV of Net Id. Assets $4,932,503 Write off ALL of GW ($13,253) Loss on Impairment of GW $19,500 Goodwill Note: To record loss on impairment of Subsidiary: Stepwise. Date $19,500 GymDVD Accounts Inventory Customer List Land Copyrights Trademark Equipment (net) Goodwill Liabilities Step 1: 14 | P a g e Carrying Value Est. Fair Value FV IS NOT < CV Carrying Value Fair Value $589,640 $579,400 $648,902 $639,801 $205,890 $236,540 $14,520 $6,654 $19,720 $17,500 $150,350 $146,258 $8,621 ($228,546) ($228,546) $1,409,097 $1,397,607 $1,409,097 $1,410,310 ($1,213) *NO IMPAIRMENT EXISTS