Three years ago, Ace Airlines (AA) was granted permission to schedule flights on the popular and profitable Newalta to Oldsford route, provided it also serviced Remoteville which is considerably further north than Oldsford. As a result, AA set up a facility in Oldsford and a small office and maintenance bay in Remoteville. Remoteville is sparsely populated and not accessible except by air. AAs controller now wants to review the Remoteville assets for impairment due to the continuing losses on the Oldsford-Remoteville route, but is not familiar with IAS 36. Instructions Write a short memo to AAs controller, identifying how he should proceed in determining whether the Remoteville assets are impaired. 2 ASSIGNMENT TWO-IAS 36 2 Waix Ltd. (WL) is a manufacturer with a number of product lines, one of which is the production of parts for residential telephone sets. Recently there have been indications that the market for this product is likely to decline significantly, and WL is assessing various assets for impairment. The following assets are used specifically to manufacture these parts: Cost Accumulated ____ Depreciation Tools and dies $ 10 $ 6 Specialized equipment 50 35 General equipment 30 18 The tools and dies and specialized equipment have no resale value other than for scrap, although the general equipment could be sold or used profitably in one of WLs other product lines. WL plans on continuing production of these parts for two more years in order to fill its existing commitments. The present value of the net cash flows from the next two years production of these parts is $26 and the estimated net amount that could be recovered if these assets were sold today is $15. 3 ASSIGNMENT TWO CONTINUOUS-IAS 36 2 Instructions a) Briefly discuss whether these assets should be assessed for impairment individually or as part of a cashgenerating unit. b) Assuming the assets are allocated to a CGU made up of the three types of assets identified, determine whether an impairment loss needs to be recognized, and if so, in what total amount. c) Prepare the entry needed to record any impairment loss indicated, assuming these assets are reported in separate asset classes.