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Hello Mike,
I hope you are in good health. I am confused with point number 2 from Question 1 of December 2012 regarding impairment.
[Both Bower and Heeny were impairment tested at 30 November 2012. The recoverable amounts of both cash
generating units as stated in the individual financial statements at 30 November 2012 were Bower,
$1,425 million, and Heeny, $604 million, respectively. The directors of Minny felt that any impairment of assets
was due to the poor performance of the intangible assets. The recoverable amount has been determined without
consideration of liabilities which all relate to the financing of operations.]What does it mean by ”The recoverable amount has been determined without
consideration of liabilities which all relate to the financing of operations”How the impairment will be calculated in this question.
Why the impairment is calculated by comparing [assets+gw] with the recoverable amount
595+23=654
(50)
604Why not the [net+gw] are compared to the recoverable value
Can you explain what it means by : The recoverable amount has been determined without
consideration of liabilities which all relate to the financing of operationsRecoverable amount is the higher of value in use compared with net selling price.
The expression that you are querying means that, in determining recoverable amount, no attention has been paid to the requirement of settling the obligations.
Don’t, please, ask me why. It’s simply the way the examiner wanted to put a little twist in the question
Why the examiner is so keen to ask question that he wants students cannot answer. I looked at an article from deloitte and it says:
”Allocating assets and liabilities to CGUs:
The allocation of assets and liabilities to a CGU, so as to establish the carrying amount of the CGU, should be determined on a basis consistent with the way the recoverable amount
of the CGU is determined (IAS 36: 75).”To me it looks like:
When it says in the question that ”The recoverable amount has been determined without consideration of liabilities which all relate to the financing of operations”
So we should also determine the carrying amount without consideration of liabilities which all related to the financing of operation in order to be consistent with the way the recoverable amount is determined.
Am I right?
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