Loco Bhd has two divisions, T and R, each of which is a separate cash-generating unit (CGU).
Question:
Loco Bhd has two divisions, T and R, each of which is a separate cash-generating unit (CGU). As at 31 December 2017 the net assets of each division, were as follows:
T | R | |
RM | RM | |
Land at cost | 284,000 | 116,000 |
Plant | 450,000 | 290,000 |
Accumulated depreciation – Plant | (240,000) | (120,000) |
Goodwill | 46,000 | 32,000 |
Patent | 210,000 | 255,000 |
Accumulated amortization – Patent | (20,000) | (102,000) |
Cash | 20,000 | 12,000 |
Inventory | 120,000 | 80,000 |
Receivables | 34,000 | 40,000 |
Net assets | 904,000 | 603,000 |
Additional information as at 31 December 2017:
- T’s land had a fair value less costs to sell of RM302,000.
- R’s land had a fair value less costs to sell of RM110,000.
- Receivables were considered to be collectable.
- Inventories were measured at lower of cost and net realizable value.
Loco Bhd’s management conducted an impairment testing at 31 December 2017 and determined the recoverable amount of each CGU to be RM811,000 for T and RM520,000 for R.
Required:
For the financial year ended 31 December 2017:
- State the main accounting standard applicable to the above situation.
- Analyse whether the CGU’s are impaired. Explain your answer.
- Calculate impairment loss for each CGU (if any).
- Allocate the impairment loss.
Probability and Statistics for Engineers and Scientists
ISBN: 978-0495107576
3rd edition
Authors: Anthony Hayter