impairement of assers

Summary An impairment loss arises where: Pea tuty Carrying value of is greater tnan the asset Recoverable amount of asset Balgince st Depr.h PV 300 I-patceno IMPAIRMENT OF ASSETS EG Learning example 7.6 On 1 January 20xo, Multiplex acquired the whole of Steamdays, a company that operates a scenic railway along the coast of a popular tourist area. The summarised Statement of flnancial position showing the fair values of the assets of Steamdays on 1 January 20X0 and reflecting the terms of the acquisition was: Now 200 2 Goodwill 1,200 Operating licence 4oo (too) oco 300 (50) (Soy Property-train stations and land (S0) 350 250 Soo 300 Rail track and coaches 290 (50) (Sco) 1,000 Two steam engines Purchase consideration 3,000 The operating licence is for ten years. It was renewed on 1 January X0 by the transport authority and is stated at the cost of renewal. The carrying amounts of the property and rail track and coaches are based on their value in use. The engines are valued at their net selling prices On 1 February 20X0, the boiler of one of the steam engines exploded, completely destroying the whole engine. Fortunately no-one was injured, but the engine was beyond repair. Due to its age, a replacement could not be obtained. Because of the reduced passenger capacity the estimated value in use of the whole of the business after the accident was assessed at $2million. Passenger numbers after the accident were below expectations even after allowing for the reduced capacity. A market research report concluded that tourists were not using the railway because of their fear of a similar accident occurring to the remaining engine. In the light of this the value in use of the business was reassessed on 31 March 20X0 at $1.8mllion. On this date, Multiplex received an offer of $900,000 in respect of the operating licence it is transferable). The reallsable value of the other net assets had not changed significantly. Calculate the carrying amount of the assets of Steamdays (in Multiplex's consolidated statement of financial position) at 1 February 20X0 and 31 March 20X0 after recognising the impairment loss. 7.6 Reversal of impairments An impairment loss on goodwill can never be reversed. An impairment loss on other assets or a CGU can be reversed where the recoverable amount has Increased because of a change in economic conditions or expected use of the asset 223 Step as dre