Learning Goal: I’m working on a accounting question and need support to help me learn.
I have statement for a compan in attachment I need to calculate the impairment loss under IAS and GAAB as the example below.
Example: Determination and Measurement of Impairment Loss At December 31, Year 1, Toca Company has specialized equipment with the following
Carrying amount. . . . . . . . . . . . . . . . . . . . . . . . . . . …. . $50,000
Selling price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …. 40,000
Costs of disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . ..…. . 1,000
Expected future cash flows . . . . . . . . . . . . . . . . . . . …. . 55,000
Present value of expected future cash flows. . . . . . … . . 46,000
In applying IAS 36, the asset’s recoverable amount would be determined as follows:
Net selling price . . . . . . . . . . . . . . . . . . . $40,000 − 1,000 = $39,000
Value in use. . . . . . . . . . . . . . . . . . . . . .. …………………….$46,000
Recoverable amount (greater of the two) …………………..……………….$46,000
The determination and measurement of impairment loss would be:
Carrying amount. . . . . . . . . . . . . . . . . . . . $50,000
Recoverable amount . . . . . . . . . . . . . . . . . 46,000
Impairment loss . . . . . . . . . . . . . . . . . . . . . $ 4,000
Impairment Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,000
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …… . . . . . . . . . . . . $4,000
To recognize an impairment loss on equipment
Under U.S. GAAP, an impairment test would be carried out as follows:
Carrying value. . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000
Expected future cash flows (undiscounted). . . . . . 55,000
Because expected future cash flows exceed the asset’s carrying value, no impairment is deemed to exist. The asset would be reported on the December 31, Year 1, balance sheet at $50,000
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