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Amortisation of intangible assets in the reporting period amounted to $8 million. The
group also conducted an impairment review on a patent that generates
income each time another company uses a particular patented production process.
The patent had a carrying amount of $12 million on 30 April 2015. The asset’s fair
value less costs to sell was $5 million on the same date. The directors of the Hessian
group have forecast that the patent will generate the following net cash flows:
Year ended $m
30 April 2016 5.2
30 April 2017 3.0
30 April 2018 2.0
––––
10.2
––––
The directors assumed that the cash flows would occur at the end of each year. They
used a discount rate of 8%.Accounting treatment in CASH FLOW ?
What bit of the question are you asking about?
Amortisation of $8 million gets added back in operating activities
The write down from $12 million to recoverable amount will be added back in operating activities
The forecast cash flows have themselves no affect on cash flows but we need those to calculate value in use to find recoverable amount
What more is there?
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