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Considering valuation under ifrs 13

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Question: Salt Company owns equipment that was purchased in an acquisition of Pork Company. The equipment has a book value of $1,820,000. It must be assessed for impairment on an annual basis. As part of this test, Salt Company needs to estimate the value in use of the equipment. It has developed cash flow estimates related to the equipment. The estimates reflect expected annual cash flows over the next 7 years. The equipment is assumed to have no residual value, and cash flows occur at the end of each year. Salt Company determines that the appropriate discount rate for these cash flows is 6%.

Salt Company has developed the following cash flow estimates related to the equipment:

Year Cash Flow Estimate
1-3 $210,000
4-6 340,000
7 410,000

Required:

Considering valuation under IFRS 13, use your financial calculator to estimate the value in use of the equipment. Note that the cash flow keys provide the most efficient solution to this problem. Show your calculations for possible partial marks

 

Reference no: EM133527579

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