Q1

On 30 SEP 20X1, an entity noticed that one of its items of plant and machinery is often l
On this date, the asset had a carrying amount of $250,000 and a fair value of $162,000.
The estimated costs required to dispose of the asset are $12,000.
If the asset is not sold, the entity estimates that it would generate cash inflows of
$100,000 in each of the next two years. The discount rate that reflects the risks specific to
The remaining life of the asset is 2 years after impairment.
Required:
(a) Discuss the accounting treatment of the above in the financial statements for the
(b) How would the answer to part (a) be different if there was a balance of $10,000
in other components of equity relating to the prior revaluation of this specific asset?

30 SEP 2001 CV 250000 IMPAIRMENT TEST

IMP LOSS (B) -76446 RECOVERABLE AMOUNT: H
30 SEP 2001 RA 173554 1. NRV = FV - COST TO SEL
NEW DEP = 173554/2 -21694 162000-12000 = 150000
x 3/12 2. VIU = PV OF FUTURE CA
31 DEC 2001 CV 151860
YR
1
2

RA IS HIGHEST =

B. ASSUME THIS ASSET HAVE A REVALUAITON SURPLUS BALANCE OF 1000

31 DEC 2001 FS
SOPL SOFP
DEP -21694 ASSET CL BAL
IMP LOSS -66446

OCI REV SURPLUS

REV LOSS -10000
 IMP LOSS = 41-13 => 28
49+35+14 = 98
Q2
Troy has identified an impairment loss of $41m for one of its cash generating units.
The carrying amount of the unit’s net assets was $150m, whereas the unit’s recoverable a
The draft values of the net assets of the unit are as follows:
CV
Goodwill 13-13 =>
Property 20
Machinery 49
Vehicles 35
Patents 14
Net monetary assets 19
Total 150

The net selling price of the unit’s assets were insignificant except for the property, which
The net monetary assets will be realised in full.
Required: How is the impairment loss allocated to the assets within the cash genera

Q3
An entity acquires a business comprising three cash-generating units, A, B and C, but the
After two years, the carrying amount and the recoverable amount of the net assets in the
and the purchased goodwill are as follows:

A B C
Carrying amount 120 180 210
Recoverable amount 150 210 180

Show the treatment?

1ST STAGE
IDENTIFY ANY IMPAIRMENT LOSSES IN INDIVIDUAL CGU AND ALLOCATE
C HAS AN IMPAIRMENT LOSS. BECAUSE ITS RECOVERABLE AMOUNT IS LE
SO C WILL BE IMPAIRED FIRST BY 30.

AFTER IMPAIRMENT,
A B C
Carrying amount 120 180 180

2ND STAGE
TOTAL CV OF THE COMPANY 555
TOTAL RA OF THE COMPANY 540
IMPAIRMENT LOSS 15

THIS 15 WILL BE CHARGED AGAINST GOODWILL.

AFTER CHARGING IMPAIRMENT,

A B C
Carrying amount 120 180 180

Q4
ASSET PURCHASED AT COST $20000;USEFUL LIFE 10YRS
PURCHASED ON 01.JAN.2010.

01.JAN.2012, THE RECOVERABLE AMOUNT OF ASSET IS $14000

01.JAN.2014, THE CONDITIONS WHICH CAUSED THE ORIGINAL

IMPAIRMENT WAS REVERSED AND THE RA OF THE ASSET IS NOW
$22000

SHOW THE TREATMENT??

FIND THE CV OF THE ASSET ON 01 JAN 2014, IF NO

IMPAIRMENT WAS RECOGNISED IN THE FIRST PLACE.

01 JAN 2010 COST 20000

DEP = 20000/10
2000 PER YEAR -8000
x 4 YEARS
01 JAN 2014 CV 12000
ILLUSTRATION 2
YEAR 1
CV 100
RA 80

IMP LOSS 20
ASSET VALUE 80

YEAR 2
CV 80
RA 140

INCOME 60
 of plant and machinery is often left idle.
00 and a fair value of $162,000.
$12,000.
generate cash inflows of
te that reflects the risks specific to this asset is 10%.

the financial statements for the year ended 31 December 20X1.

re was a balance of $10,000
luation of this specific asset? 31 DEC 2001 FS
SOPL
IMPAIRMENT TEST DEP
RECOVERABLE AMOUNT: HIGHEST OF: IMP LOSS
1. NRV = FV - COST TO SELL
162000-12000 = 150000 SOFP
2. VIU = PV OF FUTURE CASHFLOWS ASSET CL BAL

CF 10% DF PV
100000 0.9090909 90909
100000 0.8264463 82645
VIU = 173554

RA IS HIGHEST = 173554

N SURPLUS BALANCE OF 10000.

151860

10000-10000 = 0
 of its cash generating units.
, whereas the unit’s recoverable amount was only $109m.

RA
13-13 => 0
20
- 28 x 49/98 => 35
- 28 x 35/98=> 25
- 28 x 14/98 => 10
19
109

ant except for the property, which had a market value of $35m.

he assets within the cash generating unit

nerating units, A, B and C, but there is no reasonable way of allocating goodwill to them.
le amount of the net assets in the cash-generating units

Goodwill Total
75 585
540

DUAL CGU AND ALLOCATE IT ACCORDINGLY.

COVERABLE AMOUNT IS LESS THAN CARRYING VALUE.

Goodwill Total
 75 555

Goodwill Total
60 540

01 JAN 2010 COST 20000

FE 10YRS DEP = 20000/10
2000 PER YEAR -4000
x 2 YEARS
ASSET IS $14000 01 JAN 2012 CV 16000
IMP LOSS (B) -2000
THE ORIGINAL 01 JAN 2012 NEW CV 14000
THE ASSET IS NOW NEW DEP = 14000/8
1750 PER YEAR -3500
x 2 YEARS
01 JAN 2014 CV 10500
REVRSAL OF IMP 2000 1500
01 JAN 2014 NEW CV 12500 12000
20
-21694
-76446

151860
will to them.
RA = 14000
SOPL: EXPENSE

RA = 22000
SOPL: INCOME
EXAMPLE1:
CV 100 IMP LOSS ? NO
RA 120 ASSET VALUE ? 100

EXAMPLE2:
YR1:
CV 100 IMP LOSS ? 10
RA 90 ASSET VALUE ? 90

YR2:
CV 90 REVERSAL OF IMP LOSS (INCOME) 10
RA 130 ASSET VALUE? 100