Reference no: EM132532246
The Noble Company operates a factory that makes natural gas boilers. The factory is a cash-generating unit that includes goodwill, buildings, plant and equipment, and various current assets (cash, accounts receivable and inventory). The buildings include an outbuilding that was damaged in a fire on 1 November 2016. The company directors recognised an impairment that was appropriate at the time. However, on 1 August 2017, it was discovered that the damage to the outbuilding was worse than originally thought, and it is now considered to be worthless.
The following information is relevant to the cash-generating unit as at the year-end, 31 December 2017:
Asset Carrying amount ($)
Goodwill 60,000
Building 440,000
Plant & Equipment 200,000
Net current assets 150,000
Total 850,000
The following additional information is relevant:
- Net current assets are stated at recoverable amount
- The carrying amount of buildings includes the damaged outbuilding at a carrying amount of $40 000.
- The recoverable amount of the factory as a cash-generating unit is estimated as $720 000, as at 31 December 2017
Question 1: Calculate the impairment loss of the cash-generating unit as at 31 December 2017 in accordance with IAS 36. Journal entries are not required.
Question 2: Find the revised carrying amount of each of the assets in the cash-generating unit after allocating the impairment loss calculated in part (1) to the assets in the cash-generating unit in accordance with IAS 36. Journal entries are not required.