Aphrodite has a year end of 31 December and operates a factory which makes computer chips for

mobile phones. It purchased a machine on 1 July 20X3 for $80,000 which had a useful life of ten

years and is depreciated on the straight-line basis, time apportioned in the years of acquisition

and disposal. The machine was revalued to $81,000 on 1 July 20X4. There was no change to its

useful life at that date.

A fire at the factory on 1 October 20X6 damaged the machine, leaving it with a lower operating

capacity. The accountant considers that Aphrodite will need to recognise an impairment loss in

relation to this damage. The accountant has ascertained the following information at 1 October

20X6:

(1) The carrying amount of the machine is $60,750.

(2) An equivalent new machine would cost $90,000.

(3) The machine could be sold in its current condition for a gross amount of $45,000.

Dismantling costs would amount to $2,000.

(4) In its current condition, the machine could operate for three more years which gives it a

value in use figure of $38,685.

1 In accordance with IAS 16 Property, Plant and Equipment, what is the depreciation

charged to Aphrodites statement of profit or loss in respect of the machine for the year

ended 31 December 20X4?

A $9,000

B $8,000

C $8,263

D $8,500

2 IAS 36 Impairment of Assets contains a number of examples of internal and external events

which may indicate the impairment of an asset.

In accordance with IAS 36, which of the following would definitely NOT be an indicator of

the potential impairment of an asset (or group of assets)?

A An unexpected fall in the market value of one or more assets

B Adverse changes in the economic performance of one or more assets

C A significant change in the technological environment in which an asset is employed

making its software effectively obsolete

D The carrying amount of an entitys net assets being below the entitys market

Capitalisation

3 What is the total impairment loss associated with Aphrodites machine at 1 October

20X6?

A $nil

B $17,750

C $22,065

D $15,750