Determine the recoverable amount of the land

Assignment Help Financial Accounting

Reference no: EM133855386

Advanced Financial Accounting

Workshop - Impairment of Assets (AASB 136)

During Workshop Activity 1
Consider the following information relating to five different items of plant and equipment at the reporting date.

Required
Calculate the recoverable amount for each of the five items of plant and equipment.

Activity 2
‘Impairment is only relevant to assets carried under the cost model. For assets carried under the revaluation model, such as our land and buildings, increases and decreases in fair value dictate whether carrying amounts are adjusted up or down. We don't bother testing land and buildings for impairment.'
Required
Critically evaluate the above statement.

Activity 3
At 30 June 2022, an entity holds a block of land from which it generates revenue by leasing it to agricultural enterprises. The land has a carrying amount of $2.5 million. An independent market appraisal has valued the land at $2.36 million but costs to dispose of the land are estimated at $100 000. The value in use of land is determined to be $2.33 million. Get Professional Assignment Help Service Now!

Required
Determine the recoverable amount of the land.
Prepare the appropriate journal entry to record any impairment loss that should be recognised.

Activity 4
Bow Ltd reported the following assets in its statement of financial position at 30 June 2022.

The recoverable amount of the entity was calculated to be $1 660 000. The fair value less costs of disposal of the land was $280 913.

Required
Prepare the journal entry for any impairment loss at 30 June 2022.

Activity 5
What are the steps involved in reversing an impairment loss?

After Workshop

Activity 1
What are the limits to which an asset can be written down in relation to impairment losses?

Activity 2
What is a cash-generating unit (CGU)?

Activity 3
Are there limits in adjusting assets within a cash generating unit when impairment losses occur?

Activity 4
Spear Ltd reported the following information in its statement of financial position at 30 June 2019.

At 30 June 2019, Spear Ltd analysed the internal and external sources of information that would indicate deterioration in the worth of its assets. It determined that there were indications of impairment.

Spear Ltd calculated the recoverable amount of the assets to be $980 000.

Required
Provide the journal entry for any impairment loss at 30 June 2019.

Activity 5

Potters Ltd has determined that its fine china division is a CGU. The carrying amounts of the assets at 30 June 2019 are as follows.

Potters Ltd calculated the value in use of the division to be $510 000.

Required
Provide the necessary journal entries for the impairment loss.

Reference no: EM133855386

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