For the past two years, Sporty Bhd$.$ has been experiencing declining sales for its Sportswear Division. As at $31$ December $2016,$ the management decided to test whether the assets of the division are affected by the condition. The test revealed the followings:

Division's assets

Accumulated depreciation

Fair value of Division's assets $($net of cost to sell$)$

RM $28\mathrm{.}5$ million

RM $2$ million

Present Value of total future cash inflows

RM$21$ million

Interest expense $($at $\%$ of PV of total future cash inflows$)$

RM$28$ million

$10\%$

Throughout $2017,$ the market seems to be recovering as sales increasing and this condition is seen as permanent in the foreseeable future. Consequently, as at $31$ December $2017,$ the management decided that the impairment should be reversed. Depreciation rate is set at $7\%$ of Division's assets.

Required:

Discuss the accounting treatment of an impaired asset as prescribed in MFRS $136$ Impairment of Assets. In doing so$,$ you should give an example of condition where impairment test is necessary and explain the need to recognise impairment loss when it occurs and.

Show the relevant journal entries for the above as at $31$ December $2016$ and $31$ December $2017.$ Show all workings. All figures should be rounded to the nearest thousand.