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Determine the amount of the impairment loss

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Question - Chadwick Enterprises, Inc., operates several restaurants throughout the Midwest. Three of its restaurants located in the center of a large urban area have experienced declining profits due to declining population. The company's management has decided to test the assets of the restaurants for possible impairment. The relevant information for these assets is presented below. Assume that Chadwick Enterprises prepares its financial statements according to International Financial Reporting Standards.

Book value $7.1 million

Estimated undiscounted sum of future cash flows 4.3 million

Fair value 3.8 million

Assume that the fair value amount given equals both (a) the fair value less costs to sell and (b) the present value of estimated future cash flows.

Required -

1. Determine the amount of the impairment loss.

2. Determine the amount of the impairment loss assuming that the estimated undiscounted sum of future cash flows is $7.4 million and fair value is $5.3 million.

Reference no: EM133146254

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