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Neshikolo Ltd (Neshikolo) is a company that has been operating in Windhoek and manufactures clothes for women. Neshikolo acquired a wholly owned subsidiary, Defender Ltd

Neshikolo Ltd (“Neshikolo”) is a company that has been operating in Windhoek and manufactures
clothes for women.
Neshikolo acquired a wholly owned subsidiary, Defender Ltd (“Defender”) for N$ 100 000 when
the fair value of Defender’s net assets was N$ 95 000 on 31 December 2020. Defender Ltd
manufactures clothes for men.


On 31 December 2021, the fair value of Defender’s assets was N$ 86 000 and the value in use
was N$ 85 000. The carrying amounts of Defender’s assets at 31 December 2021 were as follows:


1. Buildings: N$ 50 000
2. Machines and other equipment: N$ 30 000
3. Other assets: N$ 15 000


The Cash Generating Unit (“CGU)” for the subsidiary of Neshikolo, is the company as a whole
entity. No separate division could be identified within Defender. Please note that the costs to sell
Defender as a going concern business, is estimated to be N$ 6 000.


Required:
a) Please determine what the impairment loss should be, if any, for the subsidiary as at 31
December 2021, and allocate the impairment loss to the assets accordingly.


b) Please provide journal entries, where applicable, for the allocation of the impairment loss
for the financial year ended 31 December 2021. Deferred tax journal(s) are not required.
Journal narrations are not required.


c) Please describe the criteria in IAS 38, Intangible Assets, which needs to be met in order
for development costs to be capitalised.

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