value less cost of disposal of the CGU 3700 Value in use of the CGU 4000 The recoverable amount of the shop premises was $2,900,000 on 31 December 2017. (a) What is the meaning of a “cash generating unit” in HKAS 36 Impairmentof Assets. (b) Determine the impairment loss of the retail shop on 31 December 2017. Show your workings. (c) Determine the new carrying amounts of the assets of the retail shop after impairment. Explain your calculations and show your workings.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Impairment review in 2017
On 31 December 2017, the carrying amounts of one of its retail shops (a cash generating unit) were:
$000
Shop premises 3000
Equipment 1000
Cash 800
Account payables (100)
Fair value less cost of disposal of the CGU 3700
Value in use of the CGU 4000
The recoverable amount of the shop premises was $2,900,000 on 31 December 2017.
(a) What is the meaning of a “cash generating unit” in HKAS 36 Impairmentof Assets.
(b) Determine the impairment loss of the retail shop on 31 December 2017.
Show your workings.
(c) Determine the new carrying amounts of the assets of the retail shop after impairment. Explain your calculations and show your workings.
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