Question

Given the following data relates to assets in company ABC , determine whether impairment has occurred or not, and identify the amount to be recognized.

	Carrying amount	Fair value less cost to sell	Value in use
Item 1	119,000	121,000	114,000
Item 2	237,000	207,000	205,000
Item 3	115,000	117,000	123,000
Item 4	83,000	75,000	79,000
Item 5	31,000	26,000	-

Answer 1

Solution

Impairment Loss = When Carrying amount of an assets exceeds recoverable amount

Carrying amount: the amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses

Recoverable amount: the higher of an asset's fair value less costs of disposal and its value in use

	Carrying amount	Fair value less cost	Value in use	Recoverable amount Higher of Fair Value & Value in use	Impairment loss when carrying value exceeds recoverable amount
Item 1	119,000	121,000	114,000	121,000	0
Item 2	237,000	207,000	205,000	207,000	30,000 (237000-207000)
Item 3	115,000	117,000	123,000	123,000	0
Item 4	83,000	75,000	79,000	79,000	4000 (83000-79000)
Item 5	31,000	26,000	-	26,000	5000 (31000-26000)

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