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CGU impairment of asset

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › CGU impairment of asset

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 15, 2014 at 5:37 pm #210272
    Aca1
    Member
    • Topics: 9
    • Replies: 9
    • ☆

    Hi
    Please help me on this question on CGU about pro rata allocations

    Carrying value prior to impairment
    Goodwill – 20
    Technology – 5
    Brands -10
    Land- 50
    Building -30
    Other net assets – 40
    Recoverable amounts -85
    Company suffer drop in income due to failure in technology
    The technology is worthless
    The book value of net asset is a reasonable representation of its NRV
    Calculate impairment

    November 16, 2014 at 9:24 am #210355
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    I assume from the penultimate point that the “other net assets are not included within the recoverable amount of 85. Am I correct? Recoverable amount is 85 therefore relates to the assets that you have specified and they are at the moment carried at 115 leaving us with 30 to impair

    Impair the technology by 5 leaving a further 25 to impair

    Impair goodwill in full leaving a further 5 impairment

    Spread that remaining 5 over the brand, land and buildings on a pro-rata basis

    If my assumption about the “other net assets is incorrect” then the total impairment is 70

    In that case, impair technology and goodwill as above leaving 55 more to go

    But the other net assets recoverable amounts is equal to their carrying value, so we can’t impair them – we never impair assets to a value lower than their recoverable amounts

    The remaining 55 must therefore be allocated to the brand, land and buildings in the proportion of 10:50:30

    Ok?

    November 16, 2014 at 12:13 pm #210420
    Aca1
    Member
    • Topics: 9
    • Replies: 9
    • ☆

    Thank you clear understanding

    November 16, 2014 at 9:19 pm #210541
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23321
    • ☆☆☆☆☆

    You’re welcome

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