Grohl Co that extracts natural gas and oil has a drilling platform in the Caspian Sea. It is required by legislation of the country concerned to remove and dismantle the platform at the end of its useful life.

Accordingly, Grohl Co has included an amount in its accounts for removal and dismantling costs, and is depreciating this amount over the platform's useful life.

Grohl Co is carrying out an exercise to establish whether there has been an impairment of the platform.

(a) Its carrying amount in the statement of financial position is GHS 3million.

(b) The company has received an offer of GHS 2.8million for the platform from another oil company. The bidder would take over the responsibility (and costs) for dismantling and removing the platform at the end of its life.

(c) The value in use of the estimated cash flows from the platform's continued use is GHS 3.3million

(before adjusting for dismantling costs of GHS0.6million).

What should be the value of the drilling platform in the statement of financial position, and what, if anything, is the impairment loss?

Answer rating: 100% (QA)

The value of the drilling platform in the statement of financial position should be the higher of it... View the full answer