Rhino Corporation is a manufacturer of automobile parts. It has one capital asset and one cash generating unit that needs to be tested for impairment.

The separately measurable capital asset is a piece of specialized equipment. It was originally purchased in 2017 and is being depreciated using the units of production method. By December 31, 2018, the book (carrying) value was $430,000 (after depreciation expense had been recorded). However, at that time, Rhino became aware of new technology that would make the equipment obsolete within the next five years. An appraisal puts the equipment's future undiscounted cash at $390,000, discounted net cash flows at $340,000 and its fair value is $370,000.

In addition, there is a cash generating unit that requires testing for impairment with the following carrying value information available:

Land $280,000

Building 760,000

Equipment 400,000

Goodwill 500,000

The only separately determinable fair value available from the cash generating unit is the land which has a fair value of $380,000. The fair value of the entire CGU is $1,400,000. The cash flows generated by the CGU for the next 7 years would be $245,000 per year.

For either the asset or the CGU the cost to sell would be 7% of fair value and the appropriate discount rate is 7%.

Required:

a) Assuming Rhino is a corporation that reports under IFRS, calculate the impairment loss, if any, at December 31, 2018. For the CGU, allocate the impairment loss, if any to the CGU’s assets. (7 marks)

b) Assuming that Rhino is a private entity reporting under ASPE, calculate the impairment loss if any on the asset (note for this portion only do the calculation for the asset do not also calculate the impairment loss for the CGU). (1 mark)

c) Explain the core differences between the IFRS and ASPE reporting for impairment loss. Which model is more useful to financial statement users and why? (2 marks)