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“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?”
Hello tutor,
For this question, I correctly got the recoverable amount of 15 m. But I did not understand the point of the remaining useful life of 3 years as I used the remaining useful life of the original amount, and that’s why I got the wrong answer.
Can you please explain why we have to go with the reamining useful life of the review?
Thank you tutor!
Hi,
When they have performed the impairment test that have also reassessed the life of the asset and have deduced that it has a remaining life of three years (as stated in the question). We therefore will amortise the new value of the asset over this period.
Thanks
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