Question
Topic: Reversal of Impairment of assets On 31 December 2019, Tia Ltd acquired all the assets and liabilities of Mia Ltd, a clothing manufacturer. Mia
Topic: Reversal of Impairment of assets
On 31 December 2019, Tia Ltd acquired all the assets and liabilities of Mia Ltd, a clothing manufacturer. Mia Ltd has a number of production departments, including designing. The designing division is regarded as a cash generating unit (CGU) which comprises equipment, Building, and goodwill. Carrying amounts of these assets are provided in the below table.
| Carrying amounts before impairment |
| $m |
Goodwill | 40 |
Buildings | 20 |
Equipment | 80 |
Total | 140 |
However, the product the company makes is overtaken by a technologically more advanced model produced by a competitor. As a result, the recoverable amount of the cash generating unit is expected to be reduced. The value in use of CGU is $60 million, and fair value less cost of disposal is 48 million.
31 December 2020, the entity makes a technological breakthrough of its own, and the recoverable amount of the cash generating unit increases to $70m.
Required
1. Explain the accounting treatment for reversal of impairment loss for goodwill.
(2 marks)
2. Calculate the carrying amount of each asset after the impairment loss (4 marks)
Provide the journal entry to reverse the impairment loss.Step by Step Solution
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