Q1

Fair value less cost to sell/disposal 5600000

Value in use 6600000 -1200000 = 5400000

Recoverable amount: the higher of these two above 5 600 000

Carrying value/amount 6 000 000
Impairment loss
400 000

Therefore the carrying value should be reduced to 5600 000

Q2
There has been an impairment loss of R1.4m (R4.5m -R3.1m).
The impairment loss will be recognised in profit or loss. The loss will be allocated between
the assets in the CGU as follows:
i) A loss of R1m can be attributed directly to the uninsured asset that has been
destroyed.
ii) The remaining loss of R0.4m should be allocated to goodwill.
The carrying value of the assets will now be R3m for tangible and R0.1m for goodwill.

Q3
The reversal of the impairment loss is recognised to the extent that it increases the carrying
amount of the tangible non-current assets to what it would have been had the impairment not
taken place, ie a reversal of the impairment loss of R10m is recognised and the tangible non-
current assets written back to R70m.
Reversal of the impairment is not recognised in relation to the goodwill and patent because
the effect of the external event that caused the original impairment has not reversed – the
original product is still overtaken by a more advanced model.