ACW2491 Company Reporting

Tutorial Solution
Semester 1 2016
Topic 6: Impairment of Assets

CHAPTER 13
REVIEW QUESTIONS
1.
It is a test to determine if an entitys assets are overstated, that is, whether the carrying amount of the assets
is greater than their recoverable amount.
4.

AASB 136 para 12:

(a) significant decline in market value
(b) significant changes in the technological, market, economic or legal environment in which the entity
operates
(c) increases in market interest rates
(d) the carrying amount of the entitys assets exceeds the entitys market capitalisation

5.

AASB 136 para 12:

(a) evidence of obsolescence or physical damage
(b) assets becoming idle, plans to discontinue operations, plans to dispose of assets
(c) economic performance is worse than expected

7.

AASB 136 para 60

Under cost model:
- Recognise loss immediately in profit or loss
- Write down asset if depreciable, increase accumulated depreciation and impairment losses account
Under revaluation model: as for a revaluation decrease under that model, the effect being dependent on
whether there have been past revaluation increments.

10.

AASB 136 para 104:

- Reduce the carrying amount of any goodwill allocated to the CGU
- Allocate any balance of loss to the other assets of the CGU pro rata on the basis of their carrying
amounts

PQ13.1
At 30 June 2015 Carrying amount = $200 000 (show the workings)
Recoverable amount is fair value less costs of disposal = $152 000 (show the workings)
Value in use is calculated at the present value of future cash flows = $195 200 (show the workings)
The appropriate journal entry is as follows:
Impairment loss - machine
Accumulated depreciation and impairment
losses machine
(Impairment loss on machine)

Dr
Cr

4 800
4 800

ACW2491 Company Reporting

Tutorial Solution
Semester 1 2016
Topic 6: Impairment of Assets

PQ 13.4
The journal entry to record the impairment loss is: (show the workings)
Impairment loss
Dr
Goodwill
Cr
Accumulated amortisation and
impairment losses brand
Cr
Accumulated depreciation and
impairment losses factory
Cr
Accumulated depreciation and
impairment losses machinery
Cr
(Allocation of impairment loss)

80 000
40 000
5 079
22 222
12 699

PQ 13.9 (show the workings for each of the journal entries)

31.7.2015
The journal entry to record the impairment loss to Lady CGU is:
Impairment loss
Goodwill
Accumulated depreciation and
impairment losses equipment
Accumulated amortization and
impairment losses brand

Dr
Cr

1200

Cr

930

Cr

120

The journal entry to record the impairment loss in relation to Lake CGU is:
Impairment loss
Dr
72
Accumulated impairment losses
- goodwill
Cr
31.7.2016
The journal entry to record the reversal of the impairment loss in relation to Lady CGU is:
Accumulated depreciation and
impairment losses equipment
Dr
960
Accumulated amortization and
impairment losses brand
Dr
120
(Income) Reversal of impairment loss
Cr
(Reversal of impairment loss)
In relation to the Lake CGU, there can be no reversal of the prior goodwill impairment.

150

72

1080