impairment

Question 1

how to test CGU for impairment

Answer 1

compare
recoverable amount of CGU as a whole
with
carrying amount of the CGU as a whole, including scoped out assets
less liabilities of the CGU

Question 2

Carrying amount of the CGU

Answer 2

includes CA of assets
that directly attributed or consistently allocated to the CGU

assets that will generate future cash flows that can be used to determine CGUs value in use

excluding liabilities

Question 3

when are liabilities included in CGU

Answer 3

when recoverable amount cannot be measured without consideration of the liability

e.g legal responsibility to dismantle

Question 4

what if we know the recoverable amount of an asset in the CGU?

Answer 4

first test individual asset for impairment

Question 5

scrapping an asset within a CGU

Answer 5

If an individual asset i scrapped
recoverable amount is

FV -COD = net proceeds from scrapping

VIU = no cash flows expected from use ,then
VIU equal cash inflows expected from net proceeds on scrapping

Question 6

individual asset in CGU damaged (impairment indicator) , company’s intention is to repair and use and RA more than CA of CGU

Answer 6

CGU not impaired because CA more than RA
therefore asset is not impaired

Question 7

individual asset in CGU damaged (impairment indicator) , company’s intention is to scrap for R1000 and use and RA more than CA of CGU
*no goodwill

Answer 7

because the asset is being sold , we know the recoverable amount= scrap value

so test the asset on it own, not CGU

impair individual asset then remove impairment amount form the CGU
then compare CA oF CGU to RA of CGU to see if it should be impaired
then impair if RA<CA

Question 8

Impairment of assets within a CGU journal

Answer 8

DR impairment loss (p/l)
CR asset : accumulated impairment loss (p/l)

Question 9

how do we allocate impairment of the CGU to individual assets in the CGU

Answer 9

Allocate pro-rata based on carrying amount

asset CA / total CA of all assets in CGU

Question 10

allocate impairment to CGU which contains goodwill

Answer 10

first
goodwill
less impairment
=A

if there is impairment left
then allocate to remaining scoped in assets proportionately according to CA

A x (CA1/ total CA )

Question 11

individual asset in CGU is impaired , recoverable amount can be determined and CGU contains goodwill

Answer 11

process impairment on individual asset
before calculating and allocating any impairment loss on the CGU