CGUs, reversal of impairment lossesWeatherLtd has two Cash Generating Units (CGUs) identified as the LowCGU and the
Question:
CGUs, reversal of impairment lossesWeatherLtd has two Cash Generating Units (CGU’s) identified as the LowCGU and the HighCGU. The carrying amounts of the assets of the two CGU’sat 30 June 20X1, were:
LOW CGU HIGH CGU
FIXTURES AND FITTINGS 20000 175000
ACCUMULATED DEPRECIATION 5000 100 000
BRAND - 40 000
INVENTORIES 4000 15000
RECEIVABLES 5000 20000
GOODWILL 8000 30000
The receivables were regarded as collectable, and the inventories were measured according to AASB 102/IAS 2 Inventories. The brand had a fair value less costs of disposal of $33,000. The fixtures and fittings held by the Low CGU weredepreciated by$5,000p.a.and the fixtures and fittings of the HighCGU weredepreciated at $20,000p.a..After concerns for a downturn in the local economy, WeatherLtd undertook impairment testing in June20X1, and determined the recoverable amounts of the two CGUs at 30 June20X1were:
Low CGU$26,000High CGU$125,000
The relevant assets of WeatherLtd were written down as a result of the impairment testing affecting the financial statements at 30 June 20X1. As a result of the impairment testing management reviewed the amounts expensed for depreciation in each of the CGU’s. As a result of this review, the depreciation of the fixtures and fittingsheld by the HighCGU was increased from $20,000 p.a. to $22,000 p.a. for the year 20X1–X2.By 30 June20X2, the economy had recoveredand performance in both divisions had improved, and the carrying amounts of the assets of both divisions and their recoverable amounts were:
LOW CGU HIGH CGU
Carrying amounts of assets $30000 $ 175000
Recoverable amount of CGU $35,000 $192,000
Required:
Determine how WeatherLtd should account for the results of the impairment tests at both 30 June 20X1and 30 June 20X2in accordance with the requirements of AASB 136: Impairment of Assets.
