A. The objective of the MFRS 136 Impairment of assets is to prescribe the procedures that...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A. The objective of the MFRS 136 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are not impaired. Required: Explain what is mcant by an impairment review. Your answer should include reference to assets that may form a cash generating unit. Note: You are NOT required to describe the indicators of impairment or how losses are allocated against assets. (6 marks) B. The draft financial statements of Raya Bhd for the year to 31 December 2016 are being prepared and the accountant has requested your advice on dealing the following issues: a) Raya Bhd owns a retail business which has suffered badly during the recession. Raya Bhd treats this business as a separate cash generating unit. The fair value of the cash generating unit is RM1.2 million. The carrying amounts of the assets comprising the retail business are: RM'000 900 300 Building Plant and equipment Inventory Other current assets Goodwill 70 130 40 An impairment review has been carried out as at 31 December 2016. The value in use of the assets is RM1.3 million. Required: Restate the carrying amounts of the assets of the retail business after accounting for the result of the impairment review. Discuss the relevant accounting treatment under MFRS136 to cash generating unit. (9 marks) b) Raya Bhd has an administration building which it no longer needs following a delayering exercise. On 1 July 2016, Raya Bhd entered into an agreement to let the building out to another company. The building cost RM600,000 on 1 January 2007 and is being depreciated over 50 years. Raya Bhd applies the fair values model under MFRS140 and the fair value of the building was judged to be RMS00,000 on 1 July 2016. This valuation had not changed at 31 December 2016. Another building has been let out for a number of years. It had a fair value of RMS50,000 at 31 December 2015 and RM740,000 at 31 December 2016. Required: Explain how these two buildings should be accounted for in the financial statements of Raya Bhd for the year ended 2016 and quantify the amounts involved. (10 marks) A. The objective of the MFRS 136 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are not impaired. Required: Explain what is mcant by an impairment review. Your answer should include reference to assets that may form a cash generating unit. Note: You are NOT required to describe the indicators of impairment or how losses are allocated against assets. (6 marks) B. The draft financial statements of Raya Bhd for the year to 31 December 2016 are being prepared and the accountant has requested your advice on dealing the following issues: a) Raya Bhd owns a retail business which has suffered badly during the recession. Raya Bhd treats this business as a separate cash generating unit. The fair value of the cash generating unit is RM1.2 million. The carrying amounts of the assets comprising the retail business are: RM'000 900 300 Building Plant and equipment Inventory Other current assets Goodwill 70 130 40 An impairment review has been carried out as at 31 December 2016. The value in use of the assets is RM1.3 million. Required: Restate the carrying amounts of the assets of the retail business after accounting for the result of the impairment review. Discuss the relevant accounting treatment under MFRS136 to cash generating unit. (9 marks) b) Raya Bhd has an administration building which it no longer needs following a delayering exercise. On 1 July 2016, Raya Bhd entered into an agreement to let the building out to another company. The building cost RM600,000 on 1 January 2007 and is being depreciated over 50 years. Raya Bhd applies the fair values model under MFRS140 and the fair value of the building was judged to be RMS00,000 on 1 July 2016. This valuation had not changed at 31 December 2016. Another building has been let out for a number of years. It had a fair value of RMS50,000 at 31 December 2015 and RM740,000 at 31 December 2016. Required: Explain how these two buildings should be accounted for in the financial statements of Raya Bhd for the year ended 2016 and quantify the amounts involved. (10 marks)
Expert Answer:
Answer rating: 100% (QA)
AIMPAIRMENT REVIEW An asset is impaired when its carrying amount exceeds it recoverable value At the end of every year entity is required to review whether there is any indication that the asset is to ... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
Students also viewed these accounting questions
-
On 1 July 2015, Yellow Ltd acquired all of the assets and liabilities of Black Ltd. In exchange for these assets and liabilities, Yellow Ltd issued 100,000 shares that at date of issue had a fair...
-
There is a little bit of tolerance built into accepting/rejecting your answer, but if you round in your intermediate calculations you may be too far off. Green Future Inc. is a manufacturer of...
-
QUESTION 3 20 MARKS Michelle Mental is a registered psychologist. Over the past decade, she has established herself as the leading sports psychologist for top professional sportspeople in Melbourne....
-
Can you describe the initialisation, exploration and exploitation phases of the cat hunting optimisation algorithm?
-
What are the two main components of any theory of the business cycle? Describe these two components for the real business cycle theory.
-
Consider the collection of all polynomials (with complex coefficients) of degree < N in x. (a) Does this set constitute a vector space (with the polynomials as vectors)? If so, suggest a convenient...
-
The following is the distribution of the hourly number of trucks arriving at a company's warehouse: Find the mean of this distribution, and using it (rounded to one decimal place) as the parameter...
-
Statham drew a check. The payee indorsed it to Kemp Motor Sales. Statham then stopped payment on the check on the grounds that there was a failure of consideration for the check. Kemp sued Statham on...
-
X, a designer, seeks your advice on the following: a) X has worked as a freelance graphic artist for Y Ltd for several years. His artwork for Y Ltd features a cartoon image of a humorous,...
-
Find the risk-neutral probabilities and zero cost date 0 forward prices (for settlement at date 1) for the stock in exercise 7.2. As in that exercise, assume a risk-free rate of 15% per period. 7.2....
-
Evaluate strategies that improve the employee experience and contribute to a desirable workplace culture. Provide a real life example.
-
Find interval estimates for single coefficients and linear combinations of coefficients, and interpret the interval estimates.
-
Explain the concept of a control variable and the assumption necessary for a control variable to be effective.
-
Find point and interval estimates and test hypotheses for marginal effects in polynomial regressions and models with interaction variables.
-
Recognize a multiple regression model and be able to interpret the coefficients in that model.
-
Suppose a much smaller rider (total mass of rider plus pogo of \(40 \mathrm{~kg}\) ) mechanically stretched the elastic bands of the pogo by \(0.40 \mathrm{~m}\), then got on the pogo and released...
-
1. Below is a current-voltage plot for an electrocatalytic cathodic reaction. We are using a rotating disk electrode (RDE) setup. This entire current-voltage plot was collected at a constant...
-
A Firm intends to invest some capital for a period of 15 years; the Firm's Management considers three Options, each consisting of purchasing a machinery of a specific brand, different for each...
-
Refer to Practice 168. The company had no taxable income in past years. Analysis of prospects for the future indicates that it is more likely than not that total taxable income in the foreseeable...
-
The retained earnings account for Carlitos Inc. shows the following debits and credits. Indicate all entries required to correct the account. What is the corrected amount of retainedearnings?...
-
The company manufactures a single product and has decided to adopt the dollar-value LIFO inventory method. The inventory value on that date using the newly adopted dollar-value LIFO method was...
-
Refer to the Alexia Corporation data in Short Exercise 13-17. Assume the market price of Alexia Corporations common stock is \($16.00\) per share. Compute Alexia Corporations price/earnings ratio....
-
The details in Figure 16.9 relate to D Co. Using that information and appropriate ratios, prepare a financial report on the company. The opening inventory value figures were :135,000 20X1 actual and...
-
A loan is made to a company of $20,000, which is equal to :10,000 at the date of the loan during year 1. The loan is legally denominated in dollars. At the end of year 1, the loan is translated as...
Study smarter with the SolutionInn App