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Unwinding of dicounting factor

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Unwinding of dicounting factor

  • This topic has 2 replies, 3 voices, and was last updated 12 years ago by MikeLittle.
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  • Author
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  • May 12, 2013 at 9:05 am #125221
    acca13
    Member
    • Topics: 57
    • Replies: 175
    • ☆☆☆

    Hello tutor,

    Les suppose, for finding value in use (for impairment testing) 3 years cashflows are used which resulted in an impairment meaning carrying amount was more than the recoverable amount (Value in use).
    Then next year the same cashflows were used but this time the recoverable amount was above the carrying amount.

    Could you please explain me how unwinding of discounting factor affects if the same cashflows are taken twice for impairment testing?

    Thank you.

    May 13, 2013 at 8:44 am #125308
    Ethan Bong
    Member
    • Topics: 5
    • Replies: 3
    • ☆

    Would you mind if I answer what I know of it?

    Actually, it will increase your VIU.
    However, IAS 36 not apply to unwinding of discount, therefore cannot recognised the reversal of impairment.

    May 13, 2013 at 4:15 pm #125351
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23323
    • ☆☆☆☆☆

    When you say “Then next year the same cashflows were used but this time the recoverable amount was above the carrying amount” do you mean that we are still projecting 3 years into the future? Or is the present value of 2 years’ cash flows now greater than carrying value?

    Ask me again but, this time, give me some figures to work with including a cost of capital

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