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Tagger is a Japanese multinational company that decided to expand its entertainment business in the United States.
Tagger is a Japanese multinational company that decided to expand its entertainment business in the United States. Tagger purchased CBS Records and Columbia Pictures to form Tagger Music and Tagger Pictures. Because of these acquisitions, Tagger assumed debt of $1.2 billion and allocated $3.8 billion to goodwill. On Tagger's Annual Report filed with the SEC, Tagger reported only two industry segments: electronics and entertainment. Although Tagger Music was profitable, Tagger Pictures produced continued losses of approximately $1 billion. When Tagger purchased the motion pictures operations, it projected a loss for only five years because it assumed that the motion pictures entertainment would become profitable. However, Tagger suffered a significant loss after amortization and the costs of financing the acquisition for the past four years.
In the current year, Tagger Pictures sustained a loss of nearly $450 million, double the amount that Tagger had planned. To date, Tagger Pictures has had total net losses of nearly $1billion. Early in the year, Tagger declared that it had written down $2.7 billion in goodwill associated with the acquisition of Tagger Pictures. Tagger combined the results of Tagger Music and Tagger Pictures and reported them as Tagger Entertainment. Little profit was shown in Tagger Entertainment. Tagger's consolidated financial statements did not disclose the losses from Tagger Pictures.
REQUIRED
•How should the write down of goodwill be reported? What information (if any) should be disclosed related to goodwill?
•Since Tagger has two businesses with different financial trends, should the consolidated financial statements provide specific segment disclosure information? What should the company disclose?
•Reporting insufficient information or excluding required disclosures can be misleading or perceived as unethical. What ethical standards applicable to Tagger's reporting?
