Snowy Ridge Ski Resort Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Problem Statement

The snowy Ridge ski resort is a company which has acquired by Recreational Properties. Now (Hereafter referred as RP) is facing the problem in the measurement of the assets with the fair value recognition. Company needs solution for the initial and subsequent year measurement of the purchased assets, goodwill and impairment. This case solution is solved with Financial Accounting standard board FASB standards refer as SFAS no. 157. On the other hand, some standards are used with Generally Accepted Accounting Principle GAAP. There are some assumptions are following in the analysis of all the questions which are given in this case scenario. There are two approaches which used in the solution that are market approach and income approach. Market approach use for based on the market, identifying assets and liability with ranged multiple ends. While on income approach uses for analysis of future income/earning convert into present value through different calculation methods. Every problem solution is done with two aspects that is what are the reasons for the measurement and what are the effects on the company financial position.

Answer 1

Reason

The initial recognition of the goodwill with respect to the acquisition of “Snowy ridges ski resort” are done by following the standards of accounting. Goodwill measured by difference of consideration received and fair value of net asset which is $400,000. On the other hand fair value of net assets is given in the scenario of the case study. All the analysis is done in the excel sheet name as Initial. It is also annexed in this report name as “Appendix A”.

Comment

Goodwill shows positive synergy, because it's showing the best performance of the Snowy Ridges Ski resort. It will boost the image of the company and investor will more attract toward it.

Answer 2

Reason

Fair value measurement is the basic issues for every organization and procedure is different because of the accounting bodies. This measurement has gone through with GAAP standards and analysis is done in the excel file name as fair value measurement. These analyses is also annexed in the appendices name as “Appendix B” and also followed some assumptions which are given below

In the marketable securities is assuming that value is given in the is fair value and subsequent measurement done with the principle market scenario
Mountain division is analysis through market approach and using the level of input 2 as respect to the accounting board
Lodge division is analysis through both aspects market and income, but relevant is the income approach, because where earning is concerned with uncertainty is attached with it
Real estate is also done with income approaches because allearning is related with the future, which is uncertain
This analysis is done with explanation given in each scenario

These assumptions are using standards and market reality under evaluating all aspects of the fair value of assets. Please go through every matters of the excel file which determine the fair value of the divisions.

Answer 3

Testing the impairment with respect to operating assets are key calculationsin terms of understanding the fine concept of the measurement. This impairment expenseis extracted out with some assumptions which are given below

Land analysis is done to evaluate impairment cost, but in the cases of land as per standard don’t calculate impairment cost. So difference charge in profit and loss account
Special permit has indefinite life so there is no impairment but in ski lifts there is impairment cost which is differentiated of carrying value versus fair value
On market securities the difference goes to comprehensive account because these securities are dealing with financial instruments
Lodge division deals in two parts, one is for land and other for building & equipment. In the building and equipment there is an impairment cost which is difference between fair value versus carrying value

These assumptions used with reference to the standard of accounting bodies that is FASB and GAAP. These analysesare done in the excel sheet name as “impairment expense” of the assets of the each division. Please refer all the excel file for understanding the whole scenario of the case.

Answer 4

As per the scenario of the case, goodwill impairment is not accountable because the indefinite life. According to the standards there is no recognition of this type of expense on the perpetuity life. So there is no measurement in this question as mention in the case.

Answer 5

This adjusting entry is done with GAAP requirement of the measurement of the expenses with different categories of the assets. Entries are done in the excel sheet name as adjusting entries and are also attached in Appendix C..........................

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