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“Cooper Co’s factories are recognised within property, plant and equipment at a carrying value of $60 million.
Half of the factories produce a chemical which is used in farm animal feed. Recently the government has
introduced a regulation stipulating that the chemical is phased out over the next three years.”why shouldnt we now keep the useful life at 3 years and record depreciation expense rather than thinking on the lines of impairment which was the answer to this?
There’s nothing in the question to tell us the period over which these factories are being depreciated – it could be three years!
But … there’s nothing in the answer to say that an answer slanted towards depreciation wouldn’t score marks
The only thing that you’re missing is the POSSIBILITY that an impairment is needed
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