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)?
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.
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?
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.
Thank you sir
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