Question

Ross Enterprises has compiled the following information for one of it's cash generating units. Ross Ent asks you to note that industry competition has reduced the value of its patent to $45,000 (Ross engaged a professional valuator to determine that amount). You have been engaged to calculate revised book values for the CGU given a recoverable amount of $1,150,000.                                                                                                                                          

Asset	NBV (before impairment)
Inventory	30,000
Land	600,000
Building	420,000
Furniture and Equipment	180,000
Patent	70,000
Goodwill	45,000
	$    1,345,000

Answer 1

As per Accounting standard

Impairment loss= Carrying amount-recoverable amount

=1345000-1150000=195000

First goodwill will be impaired, so 195000-45000= 150000(Remaining impairment loss)

since allocation to patent is higher then fair value hence would be carried at fair value so remaining impairment loss= 150000-25000(70000-45000)=125000

		Total Loss	1,95,000
		Less goodwill	(45,000)
		Less: patent upto fair value	(25,000)
		Remaining loss	1,25,000
Asset	NBV (before impairment)	Ratio	Allocated loss to individual assets	New CGU Book values
Inventory	30,000	1	3049	26,951
Land	6,00,000	20	60976	5,39,024
Building	4,20,000	14	42683	3,77,317
Furniture and Equipment	1,80,000	6	18293	1,61,707
Patent valued at fair value				45,000
Goodwill -completely impaired				0
	Total	41		11,50,000