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Sir, the example says that some of the plant and equipment was destroyes which had a carying value of 1.2m. Then shouldn’t we divide the 3.1m of impairment between 6m (Building) and 4m (remaining plant and equipment)?
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Hi,
No, as the plant has already suffered the impairment of $1.2 million then it cannot be impaired any further as it is now held at its recoverable amount.
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Yes, but the question says, ” The fire destroyed some plant and equipment with a carrying value of $1.2 million and there was no option but to scrap it.”
So I would assume that out of the total plant with the carrying value of $5,200, $1,200 has been completely written off and thus the remaining plant will be $4,000.
According to the notes, impairment will be allocated to:-
1) Specific assets,
2) Goodwill, and finally
3) Remaining assets (pro-rata basis)So, in that case, won’t the remaining plant be impaired according to pro-rata bases?
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No! As I said, once it has already been impaired it cannot be impaired any further. There is no damage to the rest of the plant, so it is not adjusted any further.
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