BLUES Limited (BLUES) prepares its financial statements to 31 December each year.

The company manufactures paint, and its operations are divided into two income-generating units, domestic and commercial. The following issue needs to be resolved before the financial statements for the year ended 31 December 2008 can be finalized.

The following information is available in relation to the two income-generating units.

Requirement

(a) Calculate whether an impairment loss arises for either of the two income-generating units, domestic and commercial.

(b) Allocate any impairment loss arising in accordance with IAS 36 Impairment of Assets.

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Domestic Commercial '000 '000 Goodwill 1,200 Other intangible assets 1,500 300 Property, plant and equipment 2,400 6,400 Inventory 3.300 1,400 Historic cost based carrying value 7.200 9,300 Net realisable value 7,500 4,200 Future net cash inflows: 2009 2010 2011 2012 2013 2014 1.200 1,200 900 1,300 2,700 1,600 1,500 1,500 1,600 900 1,800 1,800 Discount rate appropriate to activities of income generating units 10% 12%