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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.
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.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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