Exercise MFRS 136 Impairment of Assets

a. Naluri Sdn Berhad has a year end of 31 December and owns an item of plant which it uses to produce and package pharmaceuticals. The plant was purchased at a cost of RM750,000 on 1 January 2012 and, at that date, had an estimated useful life of five years. The plants selling price on 31 December 2012 is estimated to be RM550,000 and the cost to disposal is estimated to be RM20,000. On 31 December 2012, Naluri Sdn Bhd was informed by a major customer that it would no longer be placing orders with Naluri Sdn Bhd. As a result, Naluri Sdn Bhd revised its estimates that net cash inflows earned from the plant for the next four years would be:

Year	Cash Flows (RM)
2013	180,000
2014	120,000
2015	120,000
2016	130,000

On 31 December 2014, the economic environment improved. Due to such economic improvement, the demands for the products improved and it was expected that demand will remain at the high level for the next two years. The market value for the plant is RM300,000. The revised cash flows on 31 December 2015 and 2016 are RM200,000 for each year.

Naluri Sdn Bhds cost of capital is 8%. The following is an extract of the Present Value Factor Tables:

Period	8% Ordinary Annuity	8% Single Future Amount
1	0.9259	0.9259
2	1.7833	0.8573
3	2.5771	0.7938
4	3.3121	0.7350

Required:

1. Identify whether the plant owned by Najmi Berhad has any indication that it is possibly impaired in accordance with MFRS 136. Justify your answer.

2. Calculate the impairment loss as at 31 December 2012.

(2 mark)

(7 marks)

3. Show the journal entries (including the narrations) to record the impairment loss and the extract of Statement of Financial Position as at 31 December 2012.

4. Calculate the reversal of impairment loss as at 31 December 2014.

(4 marks)

(4 marks)

(Sub-total = 17 marks)