Question
Question: Magic plc has a retail business which is treated as a separate cash generating unit and which has suffered badly during the recession. The
Question:
Magic plc has a retail business which is treated as a separate cash generating unit and which has suffered badly during the recession.
The carrying amounts of the assets comprising the retail business are:
MUR000
Building 900
Plant and equipment 300
Inventory 70
Other current assets 130
Goodwill 40
On 31 December 2017, an impairment review has suggested that the recoverable amount of the cash generating unit is estimated at MUR 1.3m.
What will be the carrying amount of the inventory after the impairment loss in (iii) has been accounted for? (3 marks)
Confusion on answer:
As per my book, no asset shall be revalued below their recoverable amount, therefore since current assets (Inventory and other current assets) are themselves shown at the lower of cost and net realisable value, no impairment will be allocated to the current assets (inventory and other current assets).
Thus, carrying value of inventory remains at Rs 70,000.
However, that same question was sent to you some days ago where you impaired inventory and and other current assets as well.
Could you please clarify as per latest IAS updates which one is the correct one.
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