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Hi tutor,
I have the following question for the impairement section.
The question didn't mention if the future cashflows are discounted to present value.Can I write this for the matters to consider.
The question mention there is a disposal cost.Can I mention the disposal cost must be excluded from value in use and must deduct in the fair value.
Thank you
27d ago#1I am travelling abroad and will reply to you on Friday when I can properly advise you.
25d ago#2Apologies for the delay in replying. I think short answers are no - generally, just because a scenario is silent on a matter, does not mean candidates should "invent" issues/risks/matters. Also, published answers are generally comprehensive - so although marking schemes allow for additional valid points, they are hard to find
25d ago#3A long answer ...
The Q states that management has calculated ViU, and discounting future cash flows to present value is inherent in that calculation. Therefore, you should not assume that the future cash flows have not been discounted. I think, however, you could consider whether the discount rate used is appropriate (i.e. pre-tax rate reflecting current market assessments of the time value of money and risks specific to the CGU).
This is analogous to the growth rate: the issue raised in the answer is not whether growth has been applied, but whether the 1% growth rate applied is appropriate.
Since the scenario gives no indication that disposal costs have been incorrectly used in the calculation of the impairment loss, you shouldn't "manufacture" a matter to consider that isn't there.
Hi sir,
Thank you:)
25d ago#5You're most welcome! And now I'm back from holiday, I can answer posts daily.
