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Dear Mike,
In above questions Question give information about recoverable amount of sub in their individual FS to caculate impaiment of G/will. However the solution in each question have different treatment with such RA
In Q39 RA is used to compare with adjusted total asset (from $1130mil) while in Q44 compared with adjusted net asset (or total equity, from $1079mil)Please help me clear on this. What is the diff between the two treatment?
Thank you so much.
Huong, I don’t have the BPP revision kit available so I shall need the exam reference. However, I believe that I have been asked this before and, from memory (I could be wrong), is there not a line in one of the questions that says that recoverable amount should be measured against total assets rather than against net assets?
Oh Mike, sorry. The question is in Dec2011 for Traveler and Minny is from Dec12Question.
Looking forward to your help. Thank you.The last sentence in note 3 of the question tells us that all the liabilities relate to financing operations. Effectively what we have been given is net assets (if all the liabilities relate to financing)
Ok?
Sorry Mike, I still confuse.
Last sentence note 3 is that the RA had been determined WITHOUT consideration of liabilities which all related to the financing of operation.
So I think it must be net asset. But actually solution is total asset. Net asset is 879 and total asset is 1130. Pls help me.By the way if the question just give RA of sub for impairment test so we can understand it is to compare with net asset(Not total asset/ or total equity and liab)?
Luckily I know Opentuition. Thanks for your support Mike.Liabilities that relate to financing are matters like deferred tax and finance lease creditors
The question is pointing you towards comparing recoverable amount with the asset figure given and effectively telling you to forget about the liabilities
Normally we would compare with net assets but in that particular question he wants you to compare with total assets
Actually, if you think about it, there is more chance of an impairment when compared with net assets than with total assets.
But that’s irrelevant here – he’s pushing you to make that comparison with total. Don’t fight against him – if that’s what he wants you to do, do it! 🙂
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