Cost recovery impairment model Gaba Inc. purchased a non-renewable licensing agreement for access to proprietary technology that allows it to produce bio-char from organic waste. When the 10-year licensing agreement was purchased 6 years ago there were no other companies operating in the space. However, numerous competitors have emerged in the industry as direct competitors to Gaba Inc. As a result of recent market entrants, the market demand for its bio-char products has been steadily declining. The company has the following information available related to the licensing agreement: Licensing agreement at Cost .......... $125,000 Estimated Useful Life..................... 10 years Salvage Value................................. $ 0 Gaba Inc. is currently testing this asset for impairment. While the licensing agreement could currently be sold for $40,000, Gaba Inc. plans to keep producing the bio-char two more years. It expects net cash flows from production to be $20,000 yearly and that it can sell the licensing agreement for $7,500 at the end of year two. The current interest rate is 5%. Instructions a) Assume that Gaba Inc. follows ASPE and uses the cost recovery impairment model. Is there an impairment loss? Explain why or why not? b) What is the value of the impairment loss?