Question
Zoe Incorporated has a large piece of machinery where management has assessed and determined there is potential impairment. This piece of machinery has independent cash
Zoe Incorporated has a large piece of machinery where management has assessed and determined there is potential impairment. This piece of machinery has independent cash inflows. The following information relates to the machine:
- Carrying amount (book value) was $4 million.
- The Machnie has a fair value of $3 million and the cost of disposal are estimated to be $100,000.
- If the machine continues to be used in production, it is anticipated to generate $1.4 mil per year of undiscounted net cash flows for the next 3 years.
- The value in use or Present Value of the cash flows is $2.8 million.
1) If Zoe is a public company following IFRS, is the machine impaired? explain, and if there is impairment, what is the amount of the impairment loss.
2) If Zoe is a private company following IFRS, is the machine impaired? Explain, and if there is impairment, what is the amount of the impairment loss.
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