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What should be the fair value of the asset

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Reference no: EM133176654

Question - Alphonso Inc. has recently purchased equipment with a book value of $1,800,000, but according to IFRS, it is assessed for impairment on an annual basis. The equipment is assumed to have the useful life of 7 years with no salvage.

Assume the following cash flows occur at the end of each year

Years

Cash Flow Estimate

1-3

$240,000

4-6

365,000

7

425,000

Assuming Alphonso uses the discount rate of 6 for the calculations, what should be the fair value of the asset? Justify your answer according to the provisions of IFRS.

Reference no: EM133176654

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