Question

QUESTION 3 (25 MARKS) A. The objective of the MFRS 136 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are not impaired. Required: Explain what is meant by an impairment review. Your answer should include reference to assets that may form a cash generating unit. Note: You are NOT required to describe the indicators of impairment or how losses are allocated against assets. (CLOI:PLO6:C2X6 marks) B. The draft financial statements of Gamat Bhd for the year to 31 December 2018 are being prepared and the accountant has requested your advice on dealing the following issues: i. Gamat Bhd owns a retail business which has suffered badly during the recession. Gamat Bhd treats this business as a separate cash generating unit. The fair value of the cash generating unit is RM1.8 million. The carrying amounts of the assets comprising the retail business are: Building Plant and equipment Inventory Other current assets Goodwill RM"000 1350 450 105 195 60 An impairment review has been carried out as at 31 December 2018. The value in use of the assets is RM1.95 million. Required: Restate the carrying amounts of the assets of the retail business after accounting for the result of the impairment review. Discuss the relevant accounting treatment under MFRS136 to cash generating unit. [CLO1:PLO1:C3](9 marks)

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The question is complete and it consistis
A and B
B has I and II

In overall the question is about 2 pages that has been attage.

full answer work in excel is prefered..

Answer 1

An Impairment review compares the carrying amount of an asset with the higher of existing use value/ depreciated replacement cost and net relisable value.However,if an asset cannot be used or is surplus to its requirements the Impairment review compares the carrying amount of asset with net realisable value only,Since thhere is no value in use.

Net realisable value it is the amount for which an asset can be disposed of less any direct selling costs

Direct Selling Cost include legal cost and the cost of removing a tenant

If the asset is overspecified for its current use,impairment reveiw compares the carrying amount of asset with the higher of net realisable value and the existing use value\depreciated replacement cost of an asset of the lower specification.

If there is any indication that an asset may be impaired, the recoverable amount shall be estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, an entity shall determine the recoverable amount of the cash-generating unit to which the asset belongs (the asset’s cash-generating unit)

Recognition of Cash generating Unit

An asset or a group of assets which produced an output in an active market should be identified as CGU

When an entity estimates future cash Flows to determine the value in use of a CGU using the output . an asset or a group of assets which produced an output in an active market should be identified as a CGU.

MFRS 136/ FRS 136 requires that the cash inflows generated by an asset or CGU are affected by internal transfer pricing , an entity should use managements best etimate of future prices that could be achevied in arms length transactions .