On 30 September 2020, Casal plc, a UK-based company, acquired for £1,200m 75% of the share capital of Fregula plc, a company operating in the telecommunication sector. Casal plc recognized Fregula plc’s goodwill using the full goodwill method. At the acquisition date, the fair value of Fregula plc’s identifiable net assets was £950m and the fair value of Fregula plc’s non-controlling interests was £290m.

On 30 September 2021, Casal plc perform an impairment test of Fregula plc’s goodwill in accordance with IAS 36, Impairment of Assets. The impairment review performed on this data reveals the following information:

- Fregula plc’s carrying book value of net identifiable assets, after deducting all depreciation

expenses for the period, is equal to £650m.

- Fregula plc is expected to generate £200m of cash flow every year for the following five years.

- Fregula plc’s net assets would raise a net total of £930m if placed on the current market on 30 September 30, 2021.

- Actualization rate is 5%.

REQUIRED:

(a) Calculate the impairment loss, if any, and the goodwill that Casal plc should recognize in its financial statements for the year ended 30 September 2021. You are required to show all your calculations and fully state any assumptions, accounting decisions, and judgments that you make in your calculations.

(b) Explain the difference between impairment and depreciation. Support your explanations by discussing the relevant accounting principles.