Chapter 7 of Practice question- 2

DDivyasri5y ago

Hi Chris, Doubt regarding solution provided in Chapter 7 practice question 2 CGU: Total assets- 510 Recoverable amount- 350 Total impairment- 160 (50) is impaired to engine 1 (70) goodwill is full impaired (15) is impaired to brand ------ Remaining 25 (160-50-70-15) In the solution provided: remaining 25 is allocated between engine 2 and trackers and stations in pro rata basis (60:90) My doubt is, why that 25 is not allocated among net current assets, engine 1, trackers and stations in pro rata basis (60:90:150) Why impairment balance is not allocated to net current assets? Thanks in advance

P2-D2Tutor5y ago#1

Hi, This is because we've already been given the information about the engines, where only one has been impaired. As there is no further information given about the other engine then we take it that it is not impaired, The remaining impairment is not therefore allocated to it. Thanks

DDivyasri5y ago#2

Thanks for your reply Tutor, But why net current asset is not included for allocation of remaining 25. Allocation is made only between engine 2 and trackers at the ratio (60: 90) Why is it not allocated among net current asset, engine 2 and trackers in the ratio (150: 60: 90) Thanks

P2-D2Tutor5y ago#3

Hi, The net current assets will include inventory and receivables which will already be held at the value according to their appropriate standard and liabilities are not impaired. Thanks