Plethora

I imagine (without complete information) that you're looking at 945 against the building and 315 against plant and equipment. But, unless you've given me wrong figures, that allocation cannot work. In fact, no allocation can work given that buildings plus plant and equipment only aggregate 1,200 so it's a bit impossible to allocate 1,260!

values are correct. impairment was 1300 and other values for CGU's are also same it is a question from BPP.

The asset values that you have given me (note, asset values, not net asset values) aggregate $1.44 million It cannot possibly be the case that the impairment loss to be written off is $1.3 million There is something that you are not telling me! What does the BPP answer say?

I am quoting the full question here now Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit. The carrying amounts of the assets comprising the retail business are: Building $900 P&E $300 Inventory $70 Other current assets $130 Goodwill $40 An impairment review has been carried pout as at 31st Dec 20X9 and the recoverable amount of the CGU is estimated at $1.3m Required: Restate the carrying amounts of the assets of the retail business after accounting for the result of the impairment review

LOOK AT YOUR FIRST POST!!!!!! LOOK AT YOUR SECOND POST !!!! NOW COMPARE THEM WITH THIS MOST RECENT POST!!!! And there's not even a hint at an apology? Even though I TOLD you that your figures were wrong! Buildings should be impaired down to $825, plant and equipment come down to $275, inventory stays at $70 and other current assets stay at $130

Please, sir, how did you impair the building from 900 to 825 and P&E from 300 to 275? How is the impairment being done? Get me cleared please.

Before impairment the assets are carried at $1,440 After impairment, the assets will be carried at $1,300 So we need to impair by $140 The goodwill of $40 will be eliminated first, so that now leaves just $100 to impair No asset shall be reduced below its recoverable amount and, since current assets are themselves shown at the lower of cost and net realisable value, no impairment will be allocated to those current assets So, we have $100 to impair against Buildings and Plant and Equipment and we do so in the proportion of their carrying values Before impairment the ratio is 900:300 or 3:1 So 3/4 of $100 is allocated to the Buildings and 1/4 is allocated to the plant and Equipment And that leaves carrying values of $825 Buildings and $275 Plant and Equipment OK?

Oh OK now got my mistake!

BIG difference between "impaired by" and "impaired to"! You need to be a LOT more careful in the exam - a mistake like that can mean the difference between 48% and 50%

Please, what's the difference between "impaired to" and "impaired by"? Thanks.

Oh dear! You have as asset with a carrying value of $200 and you write it down to $1 What is now the carrying value?

$200. Is that all? Wish you can throw more light on what you mean. Thanks.

NO!!!!! If you have an asset with a carrying value of $200 and you write it down / impair it / depreciate it TO $1, then its new carrying value is $1 If you have an asset with a carrying value of $200 and you write it down / impair it / depreciate it BY $1, then its new carrying value is $199 And in neither situation is your answer of $200 correct!

There is MCQ on impairment here: A cash generating unit comprises the following assets: Building $700 P&E $200 Goodwill $90 Current assets$20 Total $1010 One of the machines, carried at $40,000 is damaged and will have to be scraped. The recoverable amount of the cash generating units is estimated at $ 750,00. What will be the carrying amount of the building when the impairment loss has been recognised? (to the nearest$'000). As you have done above following that I am solving this too. 1010-750=260 260-90-40=130 Now prorating this $130 among the remaining 700+20+160(after deducting the damaged machine 200-40)=880 700/880*130= 103 700-103 597 Have I done this correctly. Or I have still done any mistake?

And thanks! I will surely read the question carefully in the exam.

"As you have done above following that I am solving this too. 1010-750=260 260-90-40=130 Now prorating this $130 among the remaining 700+20+160(after deducting the damaged machine 200-40)=880 700/880*130= 103 700-103 597 Have I done this correctly. Or I have still done any mistake?" Still made a mistake :-( You are most unlikely to allocate any impairment against current assets. They should already be valued at the lower of cost and net realisable value and we never reduce an asset below its recoverable amount So the allocation of the remaining 130 is in the ratio 700 : 160 giving impairments of 106 and 24 respectively OK?

OK sir thank you!

You're welcome

Bringing this post back as I noticed that the general question has already been asked and did not want to duplicate. So is the reason that Inventory is not impaired because it's considered a current asset? My mistake in the question is that I was pro rating the 100K of impairment remaining against P&E, buildings AND inventory, when it looks like I should have just used P&E and Buildings

Hi, Inventory would be held at the lower of cost and NRV under IAS 2 and so will already be held at the correct amount within the accounts. Thanks