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Hello sir!
On computation of impairment loss for consolidation purposes, the method shows this way:
carrying amount – recoverable amount = impairment loss.CARRYING AMOUNT= Fair value of net assets of subsidiary at reporting date + goodwill
Now my question is: I agree with this method but in past papers they show a different technique.
Lets take an example of Dec 2012 past paper – Minny
In my opinion,
The carrying amount should be = (400 [fv of net assets of subs at rep date] from w3) + 23 (goodwill [w4]) = 423
Less: recoverable amount of (604)This would show no impairment loss as recoverable amount tends to be greater than carrying amount.
The answer to this question in Dec 2012 shows 50,as impairment loss is computed by taking: goodwill of 23 + fair value adj (land) [bal fig] of 36 + carrying amounts of 595
less: the recoverable amount of 604 = 50I hope you have understood my question.
Thank you.
Hi,
It was a bit sly of the examiner on this one but it says in the question that “The recoverable amount has been determined without consideration of the liabilities” so therefore we don’t use the net assets figure from the workings but the figure for the assets.
Don’t worry you wouldn’t have been the only person to have done what you did.
Thanks
So you mean to say that in this particular situation, we compute that way (the examiner’s way)?
Otherwise, we do as normal method? (fv of net assets of subsidiary at rep date + goodwill) – recoverable amount?Thank you.
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