How to deal here with stolen vehicles and entry of rivals impact on impairment

(ii) AB acquired a car taxi business on I January 20X1 for $230,000. The values of the assets of the business at that date based on net selling prices were as follows:

Vehicles (12 vehicles)

120

Intangible assets (taxi licence)

30

Trade receivables

10

Cash

50

Trade payables

(20)

190

On I February 20X1, the taxi company had three of its vehicles stolen. The net selling value of these vehicles was $30,000 and because of non-disclosure of certain risks to the insurance com- pany, the vehicles were uninsured. As a result of this event, AB wishes to recognise an impairment loss of $45,000 (inclusive of the loss of the stolen vehicles) due to the decline in the value in use of the cash generating unit, that is the taxi business. On I March 20X1 a rival taxi company com- menced business in the same area. It is anticipated that the business revenue of AB will be reduced by 25% leading to a decline in the present value in use of the business, which is calculated at $150,000. The net selling value of the taxi licence has fallen to $25.000 as a result of the rival taxi operator. The net selling values of the other assets have remained the same as at I January 20X1 throughout the period.

Required:

Describe how AB should treat the above impairments of assets in its financial statements.

(In part (b) (ii) you should show the treatment of the impairment loss at I February 20X1 and I March 20X1.)