Question 1 On 31.12.20X9, BB Ltd decided to carry out an impairment review of it
ID: 341845 • Letter: Q
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Question 1 On 31.12.20X9, BB Ltd decided to carry out an impairment review of its two CGUs. CGU 1 was not impaired, but CGU 2 is possibly impaired. The carrying value of the assets of CGU 2 on 31.12.20X9 are as follows: CGU 2 $'000 Goodwill Property, Plant & Equipment (PPE) Franchise Cash Accounts Receivables Inventory 180 400 100 300 300 400 1,680 Additional information regarding the impairment review of CGU 2 is as follow: 1) The net selling price of CGU 2 is S 700,000 2) The value in use of CGU 2 is S 1,100,000 3) Only 90% of the accounts receivable (AR) is possible to be collected. Required: Compute the impairment losses of CGU 2 (if any) and the revised carrying value of CGU 2 after the impairment losses is accounted for as per NZ IAS 36 - Impairment of AssetsExplanation / Answer
Calculation of Revised Carrying Amount of CGU 2 Given Carrying Value $ 1,680,000.00 10 % provision of AR ( 300000*10%) $ 30,000.00 Net Carrying Value $ 1,650,000 Calculation of Recoverable Amount Whichever is higher of two: Net Selling Price 700000 Value in Use o CGU 1100000 Recoerable Amount $ 1,100,000 Impairment Loss ( Carrying Value- Recoverable Amount) $ 550,000 This loss will be allocated as below Goodwill $ 180,000 Franchise ( 100/ (100+400)*( 550000-180000) $ 74,000 PPE ( 400/ (100+400)*( 550000-180000) $ 296,000 Revised Carrying Amount Goodwill 0 PPE 104000 Franchise 26000 Cash 300000 AR 270000 Inventory 400000 Revised Carrying Amount of CGU2 1100000
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