Question

A company has a long‐lived asset with a carrying value of $120,000, expected future cash flows of $130,000, present value of expected future cash flows of $100,000, and a market value of $105,000. Under IFRS what amount of impairment loss should be reported?

Answer 1

Answer:

Impairment loss of $ 15,000 should be reported.

Explanation:

IAS 36 deals with impairment on fixed asset. As per IFRS the impairment test should be carried out on each reporting date.

Impairment testing involves comparing book value of asset with higher of value in use or market value of asset.

Book Value of asset    120,000-A

Value in use                 100,000

Market Value               105,000-B

Impairment Loss           15,000   (A-B)