QUESTION 3 [28 marks! a) Explain giving an example what is meant by the impairment of an asset. (6 marks) b) Cashew Limited runs a unit that suffers a massive drop in income due to the failure of its technology on 1 January 2019. The following carrying values were recorded in the books immediately prior to the impairment: S000 Goodwill 30.000 Technology 10.000 Patents 20.000 Land 100.000 Buildings 60,000 Other net assets 80,000 The recoverable value of the unit is estimated at $234,000,000. The technology is worthless, following its complete failure. The value of patents is determined to be S14,000,000 and one building with a carrying value of S10,000,000 s now known to be valued at only $4,000,000, The other net assets include inventory, receivables and payables. It is considered that the book value of other net assets is a reasonable representation of its net realizable value. REQUIRED: Calculate the carrying amounts of the assets above at 31 January 2020 after applying any impairment losses (15 marks) c) Brazilian Resorts Incorporated (BRI) has many hotels that have been closed because of the Covid-19 pandemic. At the end of the financial year ended 31 March 2020, the hotels are still closed. Before the pandemic the hotels had a carrying value of US$640 million. Are the hotels impaired: Discuss briefly (1 marks) QUESTION 3 [28 marks! a) Explain giving an example what is meant by the impairment of an asset. (6 marks) b) Cashew Limited runs a unit that suffers a massive drop in income due to the failure of its technology on 1 January 2019. The following carrying values were recorded in the books immediately prior to the impairment: S000 Goodwill 30.000 Technology 10.000 Patents 20.000 Land 100.000 Buildings 60,000 Other net assets 80,000 The recoverable value of the unit is estimated at $234,000,000. The technology is worthless, following its complete failure. The value of patents is determined to be S14,000,000 and one building with a carrying value of S10,000,000 s now known to be valued at only $4,000,000, The other net assets include inventory, receivables and payables. It is considered that the book value of other net assets is a reasonable representation of its net realizable value. REQUIRED: Calculate the carrying amounts of the assets above at 31 January 2020 after applying any impairment losses (15 marks) c) Brazilian Resorts Incorporated (BRI) has many hotels that have been closed because of the Covid-19 pandemic. At the end of the financial year ended 31 March 2020, the hotels are still closed. Before the pandemic the hotels had a carrying value of US$640 million. Are the hotels impaired: Discuss briefly (1 marks)
