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Hi struggling with osier. Question states carrying value $137m, Net selling price was $123.5m after costs and value in use was $128m so under rules of IAS36 impairment is $9m (CV $137m minus VIU $128m e.g. higher of recoverable amount VIU / NSP) Question then goes onto say, VIU estimate was too high and should be a further $9m lower so, VIU should be $119. If this is the case, why does NSP not become the higher value meaning impairment is $137 minus $123.5m so $13.5m but instead suggests ROMM is $9m???
My reading of the question is different. When it says that ‘Consequently, the retail outlets were impaired by £9 million to restate them to their estimated recoverable amount of £128 million’ that takes the value down to 128m, which management claims is ok.
The answer then discusses why this might be wrong eg using a blanket 1%. No further impairment is quantified.
Ken,
I am referring to part B sorry.
It says… as a result of your review (the auditors) you have concluded the retail outlets are overstated because the value in use is too optimistic, our calculation of VIU is $9m lower than that of the client, hence VIU should be reduced by a further $9m.
If this is true, mgt have already impaired the retail units by $9m, the auditors suggest further impairment of $9m hence NSP is the higher with $123.5 vs ($128m – $9m )$119m.
I’m fairly sure it’s still my understanding but I just can’t get this to reconcile in my head, the ROMM in part B should be $4.5m, not $9m surely? [HELP]
I’ve looked at all four versions of this exam available on the ACCA website (UK, International, Singapore and Ireland) and cankt see what you quote. Are you using an actual ACCA exam or a question from a publisher’s question kit? The publisher might have changed the question, in which case it will be difficult to help. However if NRV is greater than VIU then the impairment should be to write down to NRV.
Ok, thanks Ken.
I will just have to go with my judgement, I’ll be honest I feel like giving up, however I will keep the faith and hope common sense prevails when my paper lands on the markers desk.
This is my last paper, I’ve come too far to give up now.
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