Question

Use the following information to answer the next (2) questions:

Pitchfork, Inc. has the following equipment reported on their year-end balance sheet at December 31, 20x1. Conditions warrant that it be reviewed for potential impairment. Use the following information to answer the next (2) questions:

Asset	Classification	Purchase Price	Accumulated Depreciation	Expected Future Cash Flows (undiscounted)	Fair Value	Remaining Useful Life
Equip FJ-670	Operating Asset – continue in use	$1,200,000	$541,500	$120,000/year	$595,000	6 years

1. Assume Pitchfork complies with U.S. GAAP reporting standards. Determine the amount of the impairment loss (if any):

2. Assume instead that Pitchfork follows IFRS reporting standards. Determine the impairment loss for Equipment FJ-670 (if any). Assume Pitchfork determines a discount rate of 8% is appropriate to find the present value of the cash flows for this asset. The PVOA (8%, 6n) is 4.6229. Pitchfork does not anticipate any salvage value.   Additionally, the company estimates a cost to sell for the asset is equal to 5% of its Fair Value. Impairment Loss:

Answer 1

1: Impairement of loss under US GAAP: Step1: Recoverability test: - a Book - valuez Purchase price (-) Accumulated depreciabon jie; $ 1200000 - 541500 - $ 658500 b undiscounted future cash flows z $ 120000 x 6years 2 $ 720000 BOOK value is lower than undiscounted felture cash flows, there is no imparem impairement of loss. Chere, Asset valu is recovered).

2. Impairement of loss unde IFRS: when BOOK value > Recoverable amount which even 15 higher Higher of Net Fair value CON Value in use e; Net for value = Fair valu- selling - Costs $ 595000-51 $ 565250 value-in-use - Discounted cash flows z $ 120000 x 4.6229 e$ 554 748- l.e. et fair value $ 565250 L

BOOK value = Purchase price - Accumulated dep $ 1200000 - $54150 e $ 658500 - 2 Book Vale > Recoverable value, impairement of loss is the difference benween two, ier impairement of loss = $658500 - $ 565257 - $ 93290