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Sandown (12/09)
1) For the calculation of other reserve, why there is *transfer of realised profit to retained earning* of $4000(1800+2200)? How can get the figure of $1800?
2) For the intangible asset -brand,why amortisation to 1.4.09 is (30000/10*6/12) while amortisation to 30.9.09 is (15000/3*6/12)? first the amortisation is divide by 10 years and then 3 years.
Note (iv) in the question. The investment increase from $7m to $8.8m will have been reflected in the past within the “Other Reserve”
Now the asset has been sold, that $1.8m increase is realised and transferred from an un-distributable reserve – the Other Reserve- to a distributable reserve – the Retained Earnings
For the brand, it was being amortised over 10 years – hence $30,000/10*6/12 for the half year up to date of re-assessment. With effect from 1 April, the company has indications that the value of the brand is impaired. The impairment review suggests that the carrying value of $30,000 less amortisation for 3.5 years of $10,500 (so $19,500) should be reduced to the recoverable amount ie to the higher of value in use compared with net selling value
The question tells you that value in use is $12m and that the company has received an offer of $15m for the brand.
Thus, it should be impaired down to $15,000
In addition, its estimated useful life is also reassessed to 3 years from 1 April
So amortisation, based on the impaired value, is $15,000/3*6/12
OK?
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