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Impairments – Impairment review – ACCA Financial Reporting (FR)

VIVA

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  2. I have a technical question please on FR.

    On recognition of an Impairment, what happens to the accumulated depreciation when the asset is written down to the new carrying value?

    Thanks.

  3. Good day
    May I please understand why in the computation of value in use we used 5000*3.791

    and why did we not use the formula C(1+10%)^5

    Thank you in advance for the answer

      • After using the given formula, I believe the answer still remains the same. They have directly given the annuity factor.

    • 1 / (1 x (1 + 10%) ^ n) – is a discounting factor. Considering the fact that we expect to receive 5,000 each year, discount factor will also be different for each year:
      Year 1 – 0.909090909
      Year 2 – 0.826446281
      Year 3 – 0.751314801
      Year 4 – 0.683013455
      Year 5 – 0.620921323
      Then each factor is multiplied by 5,000 for each year, then summed and it gives us the same 18,955.

      Annuity factor, in contrast, already counts the fact that we receive this 5,000 annually for 5 years: =(1-(1+10%)^-5)/10%.
      Therefore it makes it way easier to calculate one factor and multiply it just one time.

      Also factors are given in exam and they always should be used if there’s a need.

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