How should the transaction be dealt with

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Problem

According to IAS 36 "Impairment of Assets", Impairment loss is "the amount by which the carrying amount of an asset or a cash generating unit exceeds its recoverable amount". Guava Limited acquired a car renting business on 1st June 2011 for GHC450, 000. The values of the Net Assets acquired based on Net Selling Price were as follows: GHC'000 Property, plant and equipment 340 Intangible assets 70 Trade receivables 50 Trade payables (40) 420 On 1st August 2011, a rival car renting company commenced business in the same area. It is expected that the revenue of Guava Limited will drop by about 30%, leading to a decline in the Net Selling Price of the business, which is calculated at GHS405,000. Get the instant assignment help. The net selling price of the intangible assets has fallen to GHC60,000 as a result of the rival car renting operator. The net selling price of the other assets remained the same since 1st June 2011. How should the above transaction be dealt with?

Reference no: EM133975282

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