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Hey Mike,
Hope your Friday is going well.
Question- Bit stuck on what needs to be done here. I know its to do with amortise cost table, its an extra note within a cash flow question but im lost on where to start as it has impariment within it too. Can you guide me through this please???
“Amortisation of intangible assets in the reporting period amounted to $8 million. The
Hessian group also conducted an impairment review on a patent that generates income each time another company uses a particular patented production process. The patent had a carrying amount of $12 million on 30 April 2015. The asset’s fair value less costs to sell was $5 million on the same date. The directors of the Hessian group have forecast that the patent will generate the following net cash flows:Year ended
$m
30 April 2016 5.2
30 April 2017 3.0
30 April 2018 2.0
––––
10.2
––––
The directors assumed that the cash flows would occur at the end of each year. They used a discount rate of 8%. ”Without the benefit of a calculator, I think that value in use is around 8.7. This is higher than net realisable value but lower than carrying value
The impairment should have been (if my calculations are anywhere near) around $12 – $8.7
But you haven’t told me the amortisation rate / period nor whether the patent has been amortised for the year to April X6
If you’re going to ask questions, please do your best to include all relevant information
An exam reference would help – in that way you can guarantee that I have all relevant information
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