Viaspace, Inc. (VSPC)

[hedge_fun]

Goodwill valuations have been calculated using an income approach based on the present value of future cash flows of each reporting unit and are believed to reflect market participant views which would exist in an exit transaction. Under the income approach, we are required to make various judgmental assumptions about appropriate discount rates. Disruptions in global credit and other financial markets and deterioration of economic conditions, could, among other things, cause us to increase the discount rate used in the goodwill valuations. We could be required to evaluate the recoverability of goodwill prior to the annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of our business or sustained market capitalization declines. These types of events and the resulting analyses could result in goodwill impairment charges in the future, which could be substantial.

Could 2 different auditors come up with 2 different results? Sure.

You wouldn't be suggesting that 1 auditor would/could find an impairment charge wasn't warranted, right?

In the case of McDonald's, the charge may have been $100MM, but it was less than 10% of the company's value (if true, I assume you aren't making this up). VSPC has put HUGE amounts of time and treasure into GKG, and the result has been 1% of a projection, which totals $22K in 3 years.

In the case of Mcdonald's, I am sure if they made a bad investment, the CEO would be the first to admit it. In the case of VSPC, they lost nearly a third of their value, and could be hit again with another charge. I think this Golden Arches will likely remain even with the hit.

Let's keep this about VSPC. As I said there is a formula, or as it states, a test. It is also called an appraisal, which is a formula of sorts. In the case of my 80/20 loans, the appraiser use other "comparable" info to base the value of my projects. I am sure other auditors would likely be within a reasonable conclusion % wise when it came to the charge.


Goodwill Impairment Expense

FG Valuations, Inc. (“FFG”) was engaged by VGE to perform a goodwill impairment test, ASC 350, for the reporting unit IPA BVI and IPA China as of December 31, 2011. The purpose of the report was to express an opinion regarding any potential goodwill impairment pursuant to ASC 350 Intangibles-Goodwill and Other (“ASC 350”) issued by FASB. ASC 350-20-35 provides for a two-step impairment test to be used: to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). Based on results of the Step 1 test, FFG performed the Step 2 analysis on the Reporting Unit as part of the engagement. The date of appraisal (“Valuation Date”) was performed as of December 31, 2011. The term “fair value” is defined in ASC 820 as: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The first step of the goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit is greater than its carrying amount, goodwill of the reporting unit is considered not impaired, thus the second step of the impairment test is not required. However, if the fair value of the reporting unit is less than its carrying value, a company must perform a hypothetical purchase price allocation to measure the amount of the impairment loss, if any. The second step requires a company to compare the implied fair value of reporting unit goodwill to its carrying amount. If the carrying amount of goodwill exceeds its implied fair value, a company should recognize an impairment loss for that excess. Previously recognized impairment losses may not be reversed. Implied value of goodwill is calculated in the same manner as goodwill arising in a business combination. That is, a company should allocate the fair value of the reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the company acquired the reporting unit in a current business combination and the fair value of the reporting unit is the purchase price. The excess “purchase price” over the amounts assigned to assets and liabilities is the implied fair value of goodwill.

As a result of the study by FFG, the Company an impairment charge to its goodwill of $7,307,000 at December 31, 2011. Goodwill was reduced from $12,322,000 at December 31, 2010 to $5,015,000 at December 31, 2011.

Here's more info. Let's keep it about VSPC.

Thanks

http://accountinginfo.com/financial-accounting-standards/asc-300/350-20-goodwill.htm