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Hi Mike
Need your help for the explanation, I don’t understand the question. Thank youA cash generating unit comprises the following assets:
$’000
Building 700
Plant & equipment 200
Goodwill 90
Current assets 20One of the machines, carried at $40,000, is damaged & will have to be scrapped. The recoverable amount of the cash-generating is estimated at $750,000.
What will be the carrying amount of the building when the Impairment loss has been recognised? (to the nearest $’000)
Cgu value at the start is $1,010
Write down to zero an asset carried at $40, so carrying value now $970
New cgu value is given as 750 so a further $220 to lose
Take $90 of that from Goodwill leaving $130 more to lose
Can’t take anything from Current Assets because they are already stated at lower of cost and net realisable value
So the entire $130 needs to come from the building and the plant and equipment on a pro-rata basis
The building’s share of this $130 impairment is 700/860 x 130 = 105.8 = 106
So building needs an impairment of $106 and that will leave it with a carrying value of $594
OK?
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