Leo plc has identified a cash generating unit that is composed of the following assets with the
Question:
Leo plc has identified a cash generating unit that is composed of the following assets with the following book values:
At the end of 2021 the cash generating unit has been subjected to an impairment review. The review indicated that an item of equipment (included in the above figure of £170,000) with a carrying value of £30,000 has been severely damaged and that its recoverable value is now equal to £5,000. There is no other evidence of obvious impairment of other specific assets. The impairment review also revealed that the cash generating unit has a value in use of £510,000 and could be sold for £590,000. The associated selling costs would be £50,000.
REQUIRED:
- Calculate the associated impairment losses and allocate the impairment losses to the items of the cash generating unit at 31 December 2021. Explain the basis of your calculations.
- Discuss to what extent you believe that purchased and non-purchased intangible assets should be treated in the same accounting manner.
Fundamental Accounting Principles Volume II
ISBN: 978-1260305838
16th Canadian edition
Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann