The Faris Corporation has determined that there may be indicators of impairment for one of their assets an office building that is currently leased out and a cash generating unit (CGU) representing a business unit. Data for the building and CGU follow. The year end is December 31, 20x4 Carrying value (20 years remaining, $500,000 residual value) Fair value Building $2,800,000 2,100,000 6% of fair value Costs to sell Future cash flows generated by building (each year to the end of its useful life) $170,000 Fair Value CGU less Costs to Carrying Value Sell $1,000,000 $1,650,000 1,700,000 Land Building Equipment Goodwill 2,400,000 900,000 550,000 1,000,000 $5,300,000 $3,900,000 The CGU's cash flows are expected to be equal to $500,000 for the next five years with a residual value of $2,500,000 at the end of five years Assume a discount rate of 5%. Required - ) Calculate the amount of impairment loss (if any) for the building and CGU under the assumption that Faris is i) a publicly accountable entity. Allocate the impairment loss (if any) to the assets of the CGU a private company subject to ASPE. Just calculate the impairment loss. ii Assume that on December 31, 20x6, the recoverable amount of the building is estimated to be $2,700,000. Calculate the amount of impairment loss reversal on the building at December 31, 20x6. Assume the company is a publicly accountable entity. b) The Faris Corporation has determined that there may be indicators of impairment for one of their assets an office building that is currently leased out and a cash generating unit (CGU) representing a business unit. Data for the building and CGU follow. The year end is December 31, 20x4 Carrying value (20 years remaining, $500,000 residual value) Fair value Building $2,800,000 2,100,000 6% of fair value Costs to sell Future cash flows generated by building (each year to the end of its useful life) $170,000 Fair Value CGU less Costs to Carrying Value Sell $1,000,000 $1,650,000 1,700,000 Land Building Equipment Goodwill 2,400,000 900,000 550,000 1,000,000 $5,300,000 $3,900,000 The CGU's cash flows are expected to be equal to $500,000 for the next five years with a residual value of $2,500,000 at the end of five years Assume a discount rate of 5%. Required - ) Calculate the amount of impairment loss (if any) for the building and CGU under the assumption that Faris is i) a publicly accountable entity. Allocate the impairment loss (if any) to the assets of the CGU a private company subject to ASPE. Just calculate the impairment loss. ii Assume that on December 31, 20x6, the recoverable amount of the building is estimated to be $2,700,000. Calculate the amount of impairment loss reversal on the building at December 31, 20x6. Assume the company is a publicly accountable entity. b)
