Tutorial_2_ans.xlsx - Impairment of Asset 1(a...

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Impairment of Asset 1. (a) Building @Carrying Amount = RM10 mil x 40/50 = RM8 mil 1. Fair value (FV) = RM6 mil *take the highest number 2. Value in use (VIU) = RM4.2 mil Recoverable amount (RA) = RM6 mil CA > RA = Impairment Loss Impairment Loss = RM8 mil- RM6 mil = RM2 mil In my opinion, the asset is impaired because the carrying amount > recoverable amount (CA > RA) and it is caused by ecological changes, where the area is prone to floods. (b) Fair value (FV) = RM6 mil FV = RM6 mil VIU VIU = RM4.2 mil x 1/(1+0.03)^10) A = RM 4.62 mil = RM4.08 mil The drop in market interest rate will decrease the present value (VIU) of the rental. ( c ) The government enlarged the area closed by the river and bulit embankments to stop flood will increase the FV of the rental of the building. market interest rate - 10% market interest rate - 3% FV = RM6000000 P = RM429490 (1-(1+0.03)^36 / 0.03) VIU = RM4200000 P = RM9376734 RM4200000 = P ( 1-(1+0.1)^40 / 0.1 CA = RM 10000000-(RM200000*14) P = RM429490 CA = RM7200000 When the interest rate is low, the assets RA will be large. However, the RA is limited to RM 7200000 because RA cannot exceed CA Market interest rate - 10% Market interest rate - 3% = ( A x 1/(1+0.1)) = RM4.2 mil
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  • Fall '19
  • Depreciation, 1971, Generally Accepted Accounting Principles, RM postcode area

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