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Determine if the licence is impaired at the end

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Reference no: EM133081412

Question - At the end of 2020, Dayton Corporation owns a licence with a remaining life of 10 years and a carrying amount of $530,000. Dayton expects undiscounted future cash flows from this licence to total $535,000. The licence's fair value is $42 5,000 and disposal costs are estimated to be nil. The licence's discounted cash flows (that is, value in use) are estimated to be $475,000. Dayton prepares financial statements in accordance with IFRS.

Required -

a. Determine if the licence is impaired at the end of 2020 and prepare any related entries that are necessary.

b. Assume the recoverable amount is calculated to be $450,000 at the end of 2021. Determine if the licence is impaired at the end of 2021 and prepare any related entries that are necessary.

c. Explain how the answer to part (b) would change if the licence's fair value were $500,000 at the end of 2021.

Reference no: EM133081412

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