First Motors Corporation: A Classroom Case on Impairments

This case requires a detailed analysis of impairments of both long-lived assets and goodwill for First Motors Corporation, a fictitious automobile company. By integrating multiple issues into this case, students are presented with some of the complexities and interrelationships that are seen in practice. To properly prepare solutions to this case, students must successfully read, interpret, and apply both accounting standards and concept statements. The use of judgment in choosing a discount rate for present value computations is an important component of this case. In fact, an earnings management issue and resulting conflict between First Motors Management and the company’s auditor revolves around the discount rate choice. Additionally, the suggested questions provided with the case require that students address components of the conceptual framework in the context of the impairment standards. This case can be used in upper division financial reporting classes at either the undergraduate or graduate level.