Reference no: EM133004292

High Tower Sdn. Bhd. (HT) operates a 4-Star hotel in the Klang Valley. Travel restrictions, border closures, and quarantine caused by the Covid-19 pandemic has severely affected the hospitality industry and HT has not been spared. As such, on the advice of its auditors, the assets of HT were tested for impairment for the year ended 31 March 2021, as required by IAS 36/MFRS 136 Impairment of assets.

HT has identified 2 categories of assets for impairment testing namely its limousines which generates rental cashflows on its own and a cash generating unit which is the hotel business.

3 units of Limousines

The 3 units of limousines were purchased at RM180,000 per unit 2 years ago. The limousines were then estimated to have a useful life of 5 years and zero residual value.

The impairment review has determined a fair value less costs to sell of RM95,000 per unit for the limousines. The anticipated cash flows from the limousines are expected to be RM35,000 per unit for the next 3 years. The market discount rate is 8%.

Cash Generating Unit - Hotel
The carrying value of this cash generating unit at 31 March 2021 is as follows:

RM'000
Goodwill 1,750
Building 11,000
Furniture and equipment 6,500
Net Current Assets (At recoverable amount) 5,750
Total 25,000
The recoverable amount of the cash generating unit is estimated to be RM18 million.

Required:

Problem (a) Determine the impairment loss suffered by HT on each category of its assets for the year ended 31 March 2021.

Problem (b) Show the allocation of the impairment loss (if any) of the hotel cash generating unit of HT for the year ended 31 March 2021.