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What is impairment

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Question - Meow Plc has two investments. One, an investment in listed shares, is available for sale as a financial asset. The current market value is £405,000 but the shares were bought for £675,000. The other is an investment in a three year bond with an amortised cost of £450,000 with a stated and effective interest rate of 7% (current market rates are 10%). After two years Meow Plc is not expecting to receive the last year's interest and expects to receive only 2/3 of the principal.

Required - What is impairment? What impairment should be recorded in the accounts of Meow Plc for the listed shares and the three year bond?

Reference no: EM133003306

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