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Dear Sirs,
Regarding this question, when identifying the Revalued amount of the assets, we take the lower between the “Recoverable amount” and “the CA” OR we just take the recoverable amount immediately?“At 30 September 20X9 Sandown’s trial balance showed a brand at cost of $30 million, less accumulated amortisation brought forward at 1 October 20X8 of $9 million. Amortisation is based on a ten-year useful life. An impairment review on 1 April 20X9 concluded that the brand had a value in use of $12 million and a remaining useful life of three years. However, on the same date Sandown received an offer to purchase the brand for $15 million.
What should be the carrying amount of the brand in the statement of financial position of Sandown as at 30 September 20X9?”
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Thank you tutor!
Hi,
The recoverable amount is the higher of the value in use and fair value less costs to sell, so here the higher being the $15 million. We then compare this to the carrying value, which you can work out from the information given in the question. If the CV is greater than the $15 million then the asset is impaired down to the $15 million valuation and the difference taken through profit or loss.
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