Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Section C: You MUST answer TWO (2) out of THREE (3) questions in this section. Q12. The following table summarises the assets (in ,000) the
Section C: You MUST answer TWO (2) out of THREE (3) questions in this section. Q12. The following table summarises the assets (in ,000) the Pure Science Division ( a separate cash-generating unit) at December 31, Year 5, prior to testing goodwill for impairment. Property, Plant and Equipment and Other Intangibles are amortised on a straight-line basis over an average useful life of 15 years and 4 years, respectively. Management has estimated the present value of future cash flows from operating the Pure Science Division to be 1.35 million. No fair market value is available. Total Goodwill Property, Plant, and Equipment 800 1,500 Other Intangibles 500 2,800 Carrying amount, 12/31/44 Amortization expense, Year 5 Subtotal 0 100 90 190 800 1,400 410 2,610 Required: a) Work out the impairment amounts and carrying values at December 31 Year 5 for each component in the CGU. [8 marks] b) Due to favourable changes in export laws, management revises its estimates of the value in use for the Pure Science Division at December 31, Year 6 to be 1.85 million. Work out the impairment loss/recovery amounts and carrying values at December 31 Year 6 for each component in the CGU. [7 marks) c) What, if anything, is the difference between recoverable amount and fair value? Where revaluations are undertaken, can a reporting entity use 'value in use' as the basis for the revaluation? [5 marks) [Total 20 marks]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started