Frosties $($Pty$)$ Ltd is a dynamic food technology company based in Johannesburg, specialising in creating

innovative frozen dessert solutions. During the current financial year, the company commissioned the

development of a groundbreaking machine designed to transform the frozen yogurt industry. The machine is

engineered to produce custom$-$made frozen yogurt flavours tailored to consumer preferences in a matter of

seconds.

The following costs were incurred in relation to the machine:

Parts and components R$900000$

Precision temperature control system R$300000$

Custom mixing tools R$320000$

Store branding and displays R$350000$

Social media influencer marketing campaign R$180000$

Import duties R$40000$

The machine was completed, delivered and ready for use on $1$ May $2023.$ As an additional measure, the

machine underwent testing at popular food pop$-$ups. During this trial phase, frozen yogurt sales amounted to

R$75000,$ while the cost of ingredients totalled R$40000.$ The machine was brought into use on $1$ June $2023.$

The machine is depreciated at an annual rate of $9\%$ straight line.

By $31$ December $2024,$ Frosties $($Pty$)$ Ltd noticed that the machine$$s economic performance had declined,

and the net cash flows generated were below expectations. The following data was available regarding the

equipment as of $31$ December $2024$:

Value in use $($excluding VAT$)$: R$900000$

Fair value $($excluding VAT$)$: R$950000$

Costs to sell the equipment $($excluding VAT$)$: R$12000.4\mathrm{.}2$ Briefly discuss the objective of the test for impairment. $(3$ Marks$)$

$4\mathrm{.}3$ Calculate the impairment loss for the machine for Frosties $($Pty$)$ Ltd for the reporting period ended $31$

December $2024.$

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