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I have been taught when calculating IMPAIRMENT, whenever impairment testing was done by the company directors, I would need to following:
– NET ASSETS at y/e
– GOODWILLAlso, both these figures can quite easily be pulled from the N/A working and G/W working.
Why in this question has the examiner not referred to the N/A figure from N/A workings which comes to, 968 FOR BOWER AND 400 FOR HEENY subs.Instead the examiner pulled the figures 1130 for Bower from top of CSFP and 595 for Heeny again from the CSFP in comparing to recoverable amounts given in the question in note (iii)
I can easily scan and mail you the question with the answer if you need it.
Can you clarify this point for me.
Wayne van Straaten
Hi Wayne,
I think I remember this one as you’re correct in your fundamental understanding of impairments but the examiner threw a curve ball in there to throw everyone off the scent.
If you read the information again I think it mentions that the value in use and fair value less costs to sell do not include the value of the liabilities. Given this, so that we are comparing like for like in the impairment assessment, we need to look at the value of the subsidiary assets and not net assets as would usually have been done.
Why the examiner did this I don’t know as I doubt that many students will have picked it up in the real exam.
Thanks
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