constantly over time. The total initial cost is RM 40 million, with 50 years of lease period. whole plant with AB Contractors at arestimated cost of RM5 million the year after. IJ Corp. is expected to benefit significantly from this expansion project. It is calculated that cost of capital is IJ Corp. is a company that provides apparel for motorbikes and other two-wheeled vehicle activities. This includes safety riding jackets, gloves, riding pants and boots. IJ Corp. started its business in 2000 after acquiring a leasehold land in Shah Alam and building a plant to manufacture this line of clothing. The plant has been identified as a cash-generating unit to IJ Corp. All the relevant At the end of 2020, it is found that the carrying amount of the assets that are included in the cash- to be estimated at 11%. When testing for impairment, it is found that the fair value of the plant is 3 RM17 million. The following future nett cash inflows have been calculated by the analyst, conveying two different scenarios: (1) with, and (2) without the expansion project. Year Without Expansion With Expansion (RM'000) (RM'000) 2,500 2,500 2 2,700 2,800 3 2,900 3,000 4 3,000 3,300 5 3,200 3,500 6 3,000 3,900 7 3,300 4,200 8 3,500 4,500 9 3,900 5,000 10 4,000 5,500 1 Required: (a) Explain what will be the relevant impairment test to be performed for the year 2020. (b) Assuming that IJ Corp. will implement the restructuring plan by the end of 2021, how would this information affect the impairment test? constantly over time. The total initial cost is RM 40 million, with 50 years of lease period. whole plant with AB Contractors at arestimated cost of RM5 million the year after. IJ Corp. is expected to benefit significantly from this expansion project. It is calculated that cost of capital is IJ Corp. is a company that provides apparel for motorbikes and other two-wheeled vehicle activities. This includes safety riding jackets, gloves, riding pants and boots. IJ Corp. started its business in 2000 after acquiring a leasehold land in Shah Alam and building a plant to manufacture this line of clothing. The plant has been identified as a cash-generating unit to IJ Corp. All the relevant At the end of 2020, it is found that the carrying amount of the assets that are included in the cash- to be estimated at 11%. When testing for impairment, it is found that the fair value of the plant is 3 RM17 million. The following future nett cash inflows have been calculated by the analyst, conveying two different scenarios: (1) with, and (2) without the expansion project. Year Without Expansion With Expansion (RM'000) (RM'000) 2,500 2,500 2 2,700 2,800 3 2,900 3,000 4 3,000 3,300 5 3,200 3,500 6 3,000 3,900 7 3,300 4,200 8 3,500 4,500 9 3,900 5,000 10 4,000 5,500 1 Required: (a) Explain what will be the relevant impairment test to be performed for the year 2020. (b) Assuming that IJ Corp. will implement the restructuring plan by the end of 2021, how would this information affect the impairment test
