Question

Consider the following information relating to five different items of plant and equipment at the reporting date.

Asset	Carrying Amount $	Fair Value $	Costs of Disposal $	Value in Use $
A	100 000	105 000	3 000	110 000
B	50 000	45 000	1 000	48 000
C	80 000	85 000	2 000	82 000
D	200 000	190 000	5 0000	220 000
E	120 000	120 000	3 000	115 000

Required

1. Calculate the recoverable amount for each of the five items of plant and equipment.

2. Assuming plant and equipment is carried under the cost model, determine the amount of any impairment adjustment necessary.

3. Assuming plant and equipment is carried under the revaluation model, determine the amount of any revaluation adjustment necessary.

Answer 1

Part 1: Recoverable amount is higher of Net Selling price and Value in Use.

Net selling price = Fair Value - Cost od disposal.

Recoverable amounts are calculated as follows:

Part 2: Impairment adjustment is made only if recoverable amount is less than carrying value.

Impairmnet adjustment is calculated as follows:

Part 3: If Fair value of asset is more than carrying amount it is upward revaluation adjustemnt otherwise it is downward revaluation adjustment. Downward revaluation adjustment is indicated in the table by negative sign.