Exercise 15.12 ★ ★ ★ CORPORATE ASSETS, ALLOCATED AND UNALLOCATED Ararat Ltd has three divisions, Aramac, Alpha and Amby, which operate independently of each other to produce milk products. The company has a headquarters and a research centre located in Albury, with the divisions located throughout South Africa. The research centre interacts with all the divisions to assist in the improvement of the manufacturing process and the quality of the products manufactured by the entity. There is not as yet any basis on which to determine how the work of the research centre will be allocated to each of the three divisions, as this will depend on priorities of the company overall and issues that arise in each division. The company headquarters provides approximately equal services to each of the divisions, but an immaterial amount to the research centre. Neither the headquarters nor the research centre generates cash infl ows. On 30 June 2017, the net assets of Ararat Ltd were as follows: Aramac Alpha Amby Head offi ce Research centre Land Plant & equipment Accumulated depreciation Inventories Accounts receivable $ 440 000 840 000 (240 000 240 000 120 000 ) $ 280 000 620 000 (200 000 180 000 100 000 ) $ 160 000 540 000 (160 000 140 000 60 000 ) $110 000 80 000 (10 000 0 0 ) $ 67 000 45 000 (12 000 0 0 ) Liabilities $1 400 000 120 000 $ 980 000 100 000 $ 740 000 100 000 $180 000 0 $100 000 0 Net assets $1 280 000 $ 880 000 $ 640 000 $180 000 $100 000 Management of Ararat Ltd believes there are economic indicators to suggest that the company’s assets may have been impaired. Accordingly, they have had recoverable amount assessed for each of the divisions: Aramac Alpha Amby $ 1 550 000 1 000 000 750 000 The land held by Aramac Ltd was measured at fair value using the revaluation model because of the specialised nature of the land. At 30 June 2017, the fair value was $440 000. The land held by Alpha Ltd was measured at cost, and had a fair value less costs of disposal of $270 264 at 30 June 2017. Required Determine how Ararat Ltd should account for any impairment of the entity. Justify your decisions and complete any required journal entries.