Power-Plus Ltd is a fruit juice manufacturer with its headquarters in Victoria Falls. The company has operations in Victoria Falls and Bulawayo and gets its supplies mainly from Zambia. It prepares its financial statements using IFRSs.

At its Victoria Falls operation, the company owns a Fruit processing machine which was purchased at a cost $70 000 and put into use on 30 June 2010. The machine had a useful life of 10 years with nil residual value. During the years to June 2015, the Zambian plantations were affected by a severe draught which affected output leading to a Zambian Government imposing an embargo on exportation of fruits. This affected Power-Plus operations resulting in a professional valuator estimating the fair value of the machine at $28 000 net of disposal costs in preparation of yearend financial statements. The expected present value of future net cash flows for the machine were $21 000 as at June 2015.

During the 2015 2016 and 2016-2017 farming seasons there was a great improvement in rainfall pattern leading to the lifting of fruits export embargo by the Zambian authorities, which subsequently improved operations at Power-Plus Ltd. For the year ended 30 June 2017 the present value of net cash follows was estimated at $25 200 for the juice processing machine.

The company for several years also owns another Fruit processing plant located in Bulawayo which has been properly classified as a Cash Generating Unit (CGU) in accordance with IAS 36 (Impairment of Assets) at 30 June 2017. The CGU had three assets namely Goodwill (acquired in a business combination), land and buildings and property, plant and equipment with values of $280 000, $420 000 and $840 000 respectively.

The recoverable amount of this Juice processing plant (CGU) has been estimated at $1 092 000 while the fair value less disposal costs of PPE is $700 000.

Required

1. Discuss the indicators that impairment have reduced or no longer exist and require to be reversed for assets and CGUs. [5]
2. For the Fruit processing machine in Victoria Falls, and recognising accounting effects for impairment loss incurred for the years to June 2015, calculate the impairment reversal to be recognised for the year to 30 June 2017 and explain how it would be accounted for. [10]
3. Calculate the impairment loss of the CGU (Bulawayo Fruit plant) and demonstrate how it will be allocated to CGU assets [7]
4. Suppose the fair value net of disposal costs of PPE is $770 000, demonstrate how impairment loss will be allocated. [3]