Question 3 15 Marks Part a The objective of IAS 36 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are not impaired. Required: Explain what is meant by an impairment review. Your answer should include reference to assets that may form a cash generating unit. Note: you are NOT required to describe the indicators of an impairment or how impairment losses are allocated against assets. (4 marks) Part b (i) Chaghamazot acquired an item of plant at a cost of N$800,000 on 1 April 2019 that is used to produce and package pharmaceutical pills. The plant had an estimated residual value of N$50,000 and an estimated life of five years, neither of which has changed. Chaghamazot uses straight-line depreciation. On 31 March 2021, Chaghamazot was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Chaghamazot. Even before this information was known, Chaghamazot had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be: year ended: N$000 31 March 2022 220 31 March 2023 180

31 March 2024	170
On 31 March 2024, the plant is still expected to be sold for its estimated realisable value. Chaghamazot has confirmed that there is no market in which to sell the plant at 31 March 2021. Chaghamazots cost of capital is 10% and the following values should be used:
value of N$1 at: end of year 1 end of year 2 end of year 3	N$ 0.91 0.83 0.75

(ii) Chaghamazot owned a 100% subsidiary, Mizbach that is treated as a cash generating unit. On 31 March 2021, there was an industrial accident (a gas explosion) that caused damage to some of Mizbachs plant. The assets of Mizbach immediately before the accident were: N$000 Goodwill 1,800

Patent	1,200
Factory building	4,000
Plant	3,500
Receivables and cash	1,500
12,000

As a result of the accident, the recoverable amount of Mizbach is N$6.7 million The explosion destroyed (to the point of no further use) an item of plant that had a carrying amount of N$500,000. Mizbach has an open offer from a competitor of N$1 million for its patent. The receivables and cash are already stated at their fair values less costs to sell (net realisable values). Required: Calculate the carrying amounts of the assets in (i) and (ii) above at 31 March 2021 after applying any impairment losses. Calculations should be to the nearest N$1,000. The following mark allocation is provided as guidance for this requirement: (i) 4 marks (ii) 7 marks Total (11 marks) Question 4 40 Marks On 1 July 2018, Wakanda Ltd acquired 75% of Forever Ltds equity shares when the retained earnings of Forever Ltd were N$15,000. The summarised financial statements of the two companies for the 2020 financial year are shown below:

STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE 2020
Wakanda Ltd N$	Forever Ltd N$
ASSETS
Non-current assets
Property, plant & equipment	910,000	50,000
Investment in Forever Ltd (75 000 shares at cost)	90,000	-
Current assets
Trade and other receivables	350,000	45,000
Inventories	100,000	20,000
Bank	50,000	15,000
TOTAL ASSETS	1,500,000	130,000
EQUITY AND LIABILITIES
Equity
Share capital	350,000	100,000
Retained earnings	1,000,000	20,600
Current liabilities
Trade and other payables	150,000	9,400
TOTAL EQUITY AND LIABILITIES	1,500,000	130,000

EXTRACTS FROM THE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2020
Wakanda Ltd N$	Forever Ltd N$
Sales	968,200	121,000
Cost of sales	(650,100)	(66,000)
Gross profit	318,100	55,000
Dividend received	7,500	-
Operating expenses	(100,600)	(35,000)
Profit before tax	225,000	20,000
Income tax expense	(72,000)	(6,400)
PROFIT FOR THE YEAR	153,000	13,600
Other comprehensive income	-	-
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	153,000	13,600
EXTRACTS FROM THE STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2020
Retained earnings
Wakanda Ltd N$	Forever Ltd N$
Opening Balance 1 July 2019	900,000	17,000
Profit for the year	153,000	13,600
Other comprehensive income for the year	-	-
Ordinary dividend	(53,000)	(10,000)
Closing Balance - 30 June 2020	1,000,000	20,600

Additional notes Assume that the identifiable assets acquired and liabilities assumed at acquisition date are shown at their acquisition-date fair values. Wakanda Ltd elected to measure non-controlling interests in an acquiree at their fair value at acquisition date. The fair value of non-controlling interests was determined to be N$30,000. Wakanda Ltd recognises the equity investment in Forever Ltd in its separate financial statements using the cost method. Ignore tax implications. Required: For the year ending 30 June 2020 prepare the following for Wakanda Ltd group: a) Discuss the three elements of control in terms of IFRS 10. (3) b) Pro-forma journals necessary to prepare the consolidated financial statements. (12) (Journal narrations are not required) c) The consolidated statement of profit or loss and other comprehensive income. (9) d) The consolidated statement of financial position. (16)