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Chu-de-3 NHOM-6 - hay

Thực Hành Tổng Hợp Tiếng Anh (Đại học Kinh tế Quốc dân)

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www.IFRSbox.com Example 1: Value in use IAS 36: Impairment of assets

Swimmers Co. operates a set of water parks with leisure facilities for families in Aqualandia. During January 20X1, Swimmers acquired a boat for
organizing boat trips across the river Aquatica. Boat trip business went very well since then, however, competitor Royal Cruises decided to spread
its business to the same location.
At the end of 20X3, Swimmers Co. estimated that revenues from boat trips will go down by 12% as a result of new competitor. Managers adjusted
projection of cash flows from boat during its remaining useful life of 7 years based on most recent budgets, all available supporting information
and economic conditions surrounding boat business. These projections are justifiable for 5 years. Cash flows for years beyond 20X8 represent
management's best estimate (refer to table below).
Managers believe that at the end of boat's useful life, boat will be sold for 20 000 EUR (not included in cash flow projections below).
According to management, appropriate pre-tax discount rate reflecting risks associated with boat but excluding inflation is 5% p.a. Cash flow
projections are inflated by assumed inflation rate of 2% p.a.
Calculate boat's value in use.

Year Cash flow

20X4 72,000
20X5 69,000
20X6 64,000
20X7 59,000
20X8 52,000
20X9 45,000
20X10 38,000
399,000

1. Calculation of appropriate discount rate

Pre-inflation rate (r - real): 5.00% Post-inflation (nominal) rate:

Inflation rate (i): 2.00% Formula used: n=(1+r)*(1+i)-1
Post-inflation rate (n-nominal): 7.10% or: (1+n)=(1+r)*(1+i)

2. Calculation of value in use

Discount
Year Cash flow Present value
factor
1 72,000 0.934 67,227
2 69,000 0.872 60,155
3 64,000 0.814 52,097
4 59,000 0.760 44,843
5 52,000 0.710 36,903
6 45,000 0.663 29,818
7 38,000 0.619 23,510
314,552 A

Sale in 20X10: 20,000 0.619 12,374 B

Value in use: 326,926 A+B

Discount factor
Formula used: DF= 1/(1+n)^(year)

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www.IFRSbox.com Example 2: Impairment loss IAS 36: Impairment of assets

During preparation of financial statements for the year ended 31 December 20X3, management of Swimmers Co. performs impairment testing of its assets.
There was an external indication that boat operating in Aquatica river might be impaired.
Acquisition cost of boat was 600 000 EUR (in January 20X1), its useful life is 10 years and Swimmers apply cost model with straight-line depreciation method.
Based on current market research, Swimmers' managers estimate current market value of boat to 316 000 EUR. In the case of sale, Swimmers would have to
bear costs of final cleaning and preparation estimated to 14 000 EUR.
Value in use calculated in the previous example represents 326 926 EUR.
Calculate impairment loss of boat as of 31 December 20X3 and show the appropriate accounting treatment.
Calculate depreciation charge of boat for the year 20X4.

1. Calculation of carrying amount:

Acquisition cost: 600,000 A

Annual depreciation charge (600 000 / 10): 60,000
Accumulated depreciation as of 31 Dec 20X3 (3*60 000): 180,000 B
Carrying amount as of 31 Dec 20X3 (600 000 - 180 000): 420,000 A-B

2. Calculation of recoverable amount:

Value in use: 326,926

Fair value less cost to sell (316 000 - 14 000) 302,000
Recoverable amount as of 31 Dec 20X3 (higher of): 326,926

3. Calculation of impairment loss:

Carrying amount as of 31 Dec 20X3: 420,000 C

Recoverable amount as of 31 Dec 20X3: 326,926 D
Impairment loss as of 31 Dec 20X3: 93,074 C-D

4. Accounting treatment:

Debit Profit or loss - Impairment loss 93,074

Credit PPE (boat) -93,074
0

5. Depreciation charge for 20X4:

Revised carrying amount as of 31 Dec 20X3

326,926
(420 000 - 93 074):
Remaining useful life: 7 years
Depreciation charge for 20X4 (326 926 / 7): 46,704

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www.IFRSbox.com Example 3: Identification of cash generating unit IAS 36: Impairment of assets

1. Retail store chain

Q: NiceHomes Corp. runs a number of stores selling furniture and home accessories in various cities. Every store makes all its retail purchases through
NiceHomes' purchasing centre. Marketing, advertising and human resources are centralized in NiceHomes' headquarters. All stores are managed in the same
way
What is the cash generating unit for NiceHomes?

A: In identifying NiceHomes' cash generating unit, the following shall be considered for example:
- how performance is measured (store-by-store basis? country basis?)
- how the business is run (store-by-store basis? country basis?).
All stores are in different cities and probably have different customer basis. Therefore, although managed at central level, individual stores generate cash
inflows that are largely independent of other stores. Thus it is likely that each individual store represents cash generating unit.

2. Plant for an intermediate step in a production process

Q: CarProd Corp. , a car producer, uses engines and other components produced by its plant A in a car assembly process that is performed in its plant B.
Plant A sells 70% of its production to plant B and remaining 30% to external customers.
Plant B sells 90% of its production to external customers and remaining 10% to CarProds' other plants.
What are the cash generating units for plant A and B in the following 2 scenarios:
a) There is active market for engines and other components produced by plant A and sold to plant B.
b) There is no active market for engines and other components produced by plant A and sold to plant B.

External
customers

Plant B

Plant A
Internal
customers
External
customers

A:
a) Plant A could sell all its production in an active market and thus generate cash inflows that would be largely independent of the cash inflows from plant B.
Therefore, plant A is separate CGU although part of its production is used internally within CarProd by plant B. Plant B is also likely separate CGU as 90% of its
products is sold to external customers.
b) In this case, recoverable amount of each plant cannot be assessed independently of other plant. The main reason is that majority of A's production is used
internally and cannot be sold in non-existing active market. Thus, cash inflows of A depend on B's products and cash inflows cannot be considered
independent from each other.

3. Plants in different regions

Q: Phtalate Corp. is a producer of chemical agents that are produced in 3 plants operating in 3 different countries. Plant in Cleanlandia produces chemicals
that are used for final products by 2 other plants. Plant in Alandia and plant in Belandia produce final chemical agents that are sold worldwide from either
Alandia or Belandia. Production levels of these 2 plants are not independent of each other, but depend on the allocation of sales between the 2 plants.
What are the cash generating units for Phtalate Corp. in the following 2 scenarios:
a) There is active market for chemicals produced by plant in Cleanlandia.
b) There is no active market for chemicals produced by plant in Cleanlandia.

A:
a) Plant in Cleanlandia could sell all its production in an active market and thus generate cash inflows that would be largely independent of the cash inflows
from other plants. Therefore, this plant is separate CGU.
Cash inflows of plants in Alandia and Belandia depend on allocation of sales / production and it is not likely that future cash inflows can be determined
independently for these 2. Therefore, these 2 plants together are the smallest identifiable group of assets that generate cash inflows largely independent
from others.
b) In this case, recoverable amount of each plant cannot be assessed independently of other plant. The main reason is that Cleanlandia's products cannot be
sold in non-existing active market and 2 other plants do not generate largely independent cash inflows from each other. Thus, all 3 plants together represent
cash generating unit.

4. Building half-rented to others and half occupied for own use

Q: CarProd owns a headquarters' building that used to be fully occupied. However, due to financial crisis and subsequent downsizing, CarProd decided to rent
free space to third parties. What is cash generating unit in relation to building?

A: The primary purpose of building is to serve as a corporate asset that supports CarProd's manufacturing business. Therefore, building as a whole cannot be
considered to generate cash inflows largely independent from other cash inflows of entity. Thus, it is likely that the CGU for the building is CarProd as a
whole.

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www.IFRSbox.com Example 4: Impairment of cash generating unit IAS 36: Impairment of assets

Electra Corp. owns a number of nuclear power plants in various continents. At the end of 20X3, Electra Corp. is testing a plant in Alandia for impairment.
The plant consists of the following items (with their carrying amounts as of 31 December 20X3):
Atomic reactors, cooling tower, store of nuclear fuel, all with equipment - EUR 55 mil. (includes initial estimate of decommissioning costs)
Other technical facilities directly related to power plant - EUR 8 mil.
Administrative building with equipment (fully used in plant) - EUR 2 mil.
Receivables of the plant - EUR 2 mil.
Liabilities of the plant - EUR 1 mil.
Provision for decommissioning costs - EUR 15 mil. (equal to their present value).
Remaining useful life of this plant is 10 years (ending 20X13). New electricity producers from alternative sources forced Electra to decrease production in
this plant. With respect to this situation, Electra's management prepared new financial forecasts for the plant, excluding decommissioning and restoration
costs, financial assets and other liabilities (in table below). Plant generates cash inflows as a whole.
Electra received offer to sell the plant at the price around EUR 42 mil. This price reflects the fact that the buyer will assume obligation to decommission the
plant and restore the site. Cost to sell the plant is negligible.
Calculate any impairment loss. Appropriate pre-tax discount rate is 5% p.a.

in EUR '000
Year Cash flow
20X4 10,200
20X5 9,550
20X6 8,900
20X7 8,250
20X8 7,600
20X9 6,950
20X10 6,300
20X11 5,650
20X12 5,000
20X13 4,350
72,750

1. Identification of CGU

In this case, CGU is a plant in Alandia as a whole, as individual assets do not generate cash inflows largely independent from others.

2. Calculation of value in use (EUR'000)

Discount factor
Year Cash flow Present value
at 5%
1 10,200 0.952 9,710
2 9,550 0.907 8,662
3 8,900 0.864 7,690
4 8,250 0.823 6,790
5 7,600 0.784 5,958
6 6,950 0.746 5,185
7 6,300 0.711 4,479
8 5,650 0.677 3,825
9 5,000 0.645 3,225
10 4,350 0.614 2,671
72,750 58,195 A

Present value of decommissioning / restoration costs in 20X13: -15000 B

Value in use: 43,195 A+B

Discount factor
Formula used: DF= 1/(1+r)^year

3. Calculation of recoverable amount (EUR '000)

Value in use: 43,195

Fair value less cost to sell: 42,000
Recoverable amount as of 31 Dec 20X3 (higher of): 43,195

4. Calculation of impairment loss (EUR '000)

Carrying amount:
Reactors, tower, store, equipment 55,000
Other technical facilities 8,000
Administrative building 2,000
less Provision for decommissioning and restoration costs -15,000
Carrying amount as of 31 Dec 20X3: 50,000 C

Recoverable amount as of 31 Dec 20X3: 43,195 D

Impairment loss as of 31 Dec 20X3: 6,805 E=C-D

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www.IFRSbox.com Example 4: Impairment of cash generating unit IAS 36: Impairment of assets

5. Allocation of impairment loss (EUR '000)

G G*E
Allocated
Carrying
Asset % of total value impairment
amount
loss
Reactors, tower, store, equipment 55,000 84.62% 5,758
Other technical facilities 8,000 12.31% 838
Administrative building 2,000 3.08% 209
Total 65,000 100.00% 6,805

6. Accounting treatment

Debit Profit or loss - Impairment loss 6,805

-5,758
Credit PPE (reactors, tower, store, equipment)
-838
Credit PPE (other technical facilities) -209
Credit PPE (administrative building) 0

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www.IFRSbox.com Example 5: Cash generating unit with goodwill IAS 36: Impairment of assets

At the end of 20X1, Swimmers Co. acquired Beautiful Spas Co. for total purchase price of EUR 100 mil. Beautiful Spas operate 3 health resorts in 3 different
countries. The main activity of each health resort is providing medical care by utilization of natural sources such as healing springs and local healing mud.
Each resort also provides additional services such as wellness procedures, sport and leisure activities etc.. These additional services generate only minor part
of total revenues that strongly depend on main activities (as clients usually come to resorts due to healing springs / mud). Swimmers Co. considers each
health resort as separate cash generating unit.
In 20X3, water analysis in health resort in Alandia showed slight contamination that needs to be treated carefully. However, due to news in media, number
of customers in Alandia resort severely dropped.
Based on financial data provided below, calculate and allocate impairment loss on a group level.
Financial data
at acquisition in EUR '000
Fair value of
Health resort Purchase price Goodwill
identifiable assets
Alandia 40,000 34,000 6,000
Belandia 35,000 32,000 3,000
Celandia 25,000 21,000 4,000
Total 100,000 87,000 13,000

for Alandia as of 31 Dec 20X3 in EUR '000

Accumulated Carrying
Asset Historical cost
depreciation amount
Healing springs with land 13,000 1,300 11,700
Source of healing mud 7,500 750 6,750
Spa facilities 6,500 650 5,850
Sport / leisure facilities 4,000 400 3,600
Administrative buildings 2,500 250 2,250
Other PPE 500 100 400
Subtotal 34,000 3,450 30,550
Goodwill 6,000
Total 36,550

Value in use as projected by management: 20,000

Fair value less cost to sell based on recent offer: 20,500

1. Calculation of recoverable amount (EUR '000)

Value in use: 20,000

Fair value less cost to sell: 20,500
Recoverable amount as of 31 Dec 20X3 (higher of): 20,500

2. Calculation of impairment loss (EUR '000)

Carrying amount as of 31 Dec 20X3: 36,550

Recoverable amount as of 31 Dec 200X3: 20,500

Impairment loss as of 31 Dec 20X3: 16,050

3. Allocation of impairment loss (EUR '000)

Loss allocated to goodwill: 6,000

Remaining loss to allocate pro-rata (16 050 - 6 000): 10,050

Allocation of remaining impairment loss:

Allocated
Carrying
Asset % of total value impairment
amount
loss
Healing springs with land 11,700 38.30% 3,849
Source of healing mud 6,750 22.09% 2,221
Spa facilities 5,850 19.15% 1,924
Sport / leisure facilities 3,600 11.78% 1,184
Administrative buildings 2,250 7.36% 740
Other PPE 400 1.31% 132
Total 30,550 100% 10,050

4. Accounting treatment

Debit Profit or loss - Impairment loss 16,050

Credit Goodwill -6,000
Credit PPE (healing springs with land) -3,849
Credit PPE (source of healing mud) -2,221
-1,924
Credit PPE (spa facilities)
-1,184
Credit PPE (sport / leisure facilities)
-740
Credit PPE (administrative buildings) -132
Credit PPE (other PPE) 0

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www.IFRSbox.com Example 6: Corporate assets IAS 36: Impairment of assets

LCD corp. runs 5 plants manufacturing LCDs in different countries. Each of them represents separate cash generating unit. However, certain operations, such
as financial management, human resources policy etc. are conducted from headquarters. Also, LCD corp. has research center that serves to all factories.
Due to adverse technological changes, LCD corp. performs impairment test as of 31 December 20X3. Using financial data below, calculate and allocate
impairment loss. LCD applies cost model in line with IAS 16.
Note: according to management's decision, carrying amount of headquarters premises can be allocated to CGUs under review, but carrying amount of
research center cannot. Allocation basis of HQ premises is carrying amounts of plants weighted by their estimated remaining useful life.

Financial data
at the end of 20X3 in EUR '000
Carrying Estimated remaining
Plant Recoverable amount Impairment loss
amount useful life (years)
Plant 1 54,000 18 62,000
Plant 2 43,000 12 31,000 12,000
Plant 3 60,000 20 70,000
Plant 4 52,000 18 59,000
Plant 5 38,000 7 35,000 3,000
Total 247,000 75 257,000

Recoverable amount of whole LCD corp.: 270,000

Carrying amount of headquarters premises: 25,000

Carrying amount of research center: 15,000

1.Allocation of headquarter's building

A B C=A*B
Allocation of
Carrying Estimated remaining Pro-rata
Plant CA after weighting headquarters
amount useful life (years) allocation
premises
Plant 1 54,000 18 972,000 24.99% 6,247
Plant 2 43,000 12 516,000 13.26% 3,316
Plant 3 60,000 20 1,200,000 30.85% 7,712
Plant 4 52,000 18 936,000 24.06% 6,015
Plant 5 38,000 7 266,000 6.84% 1,710
Total 247,000 75 3,890,000 100.00% 25,000

2. Calculation of impairment loss

D E F=D+E G compare F and G

Carrying CA of allocated HQ Recoverable
Plant CA after allocation Impairment loss
amount premises amount
Plant 1 54,000 6,247 60,247 62,000 0
Plant 2 43,000 3,316 46,316 31,000 15,316
Plant 3 60,000 7,712 67,712 70,000 0
Plant 4 52,000 6,015 58,015 59,000 0
Plant 5 38,000 1,710 39,710 35,000 4,710
Total 247,000 25,000 272,000 257,000 20,026

3.Allocation of impairment losses

E/F*impairment loss D/F*impairment loss

Impairment
Plant To HQ premises To assets in CGU
loss
Plant 2 15,316 1,097 14,220
Plant 5 4,710 203 4,507
Total 20,026 1,299 18,726

Allocation of IL to HQ premises:
Formula used:
CA of allocated HQ / CA after allocation * IL

4. Testing group of CGUs for impairment

H I J = H-I
Carrying Impairment loss at 1st Recoverable Impairment loss of
Assets CA after impairment
amount level amount larger CGU
Plant 1 54,000 54,000
Plant 2 43,000 -14,220 28,780
Plant 3 60,000 60,000
Plant 4 52,000 52,000 n/a n/a
Plant 5 38,000 -4,507 33,493
Headquarters 25,000 -1,299 23,701
Research center 15,000 15,000
Total 287,000 -20,026 266,974 270,000 0

14
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www.IFRSbox.com Example 6: Corporate assets IAS 36: Impairment of assets

5. Accounting treatment

Debit Profit or loss - Impairment loss 20,026

Credit PPE (assets in plant 2 allocated pro-rata) -14,220
Credit PPE (assets in plant 5 allocated pro-rata) -4,507
Credit PPE (headquarters premises) -1,299
0

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www.IFRSbox.com Example 7: Reversal of impairment loss IAS 36: Impairment of assets

Back to health resort question: During 20X5, new water analysis in Alandia resort owned by Beautiful Spas showed that water was no longer contaminated.
To improve its reputation, Beautiful Spas (subsidiary of Swimmers) launched massive advertising campaign and as a result, number of customers significantly
increased in comparison with the year 20X3 and 20X4. Based on these facts and as a part of an impairment testing, management prepared new cash flow
projections for Alandia resort.
Based on financial data shown below, advice Swimmers Corp. how to deal with this situation in group accounts for the year ended 31 December 20X5.

Financial data:

as of 31 Dec 20X3 in EUR '000 - from example on Business Combinations

Accum. depreciation Impairment Carrying
Asset Historical cost
before IL loss in 20X3 amount
Healing springs with land 13,000 1,300 3,849 7,851
Source of healing mud 7,500 750 2,221 4,529
Spa facilities 6,500 650 1,924 3,926
Sport / leisure facilities 4,000 400 1,184 2,416
Administrative buildings 2,500 250 740 1,510
Other PPE 500 100 132 268
Subtotal 34,000 3,450 10,050 20,500
Goodwill 6,000 0 6,000 0
Total 40,000 3,450 16,050 20,500

as of 31 Dec 20X5 in EUR '000

Carrying amount
As would be had no IL
Asset
As shown been recognized in
20X3
Healing springs with land 6,280 9,360
Source of healing mud 3,624 5,400
Spa facilities 3,140 4,680
Sport / leisure facilities 1,932 2,880
Administrative buildings 1,207 1,800
Other PPE 215 320
Subtotal 16,398 24,440
Goodwill 0 6,000
Total 16,398 30,440

Value in use based on managers' projections as of 31 Dec 20X5: 32,000

Fair value less cost to sell based on recent offer: 28,000

1. Calculation of recoverable amount (EUR '000)

Value in use: 32,000

Fair value less cost to sell: 28,000
Recoverable amount as of 31 Dec 20X5 (higher of): 32,000 A

2. Calculation of reversal of impairment loss (EUR '000)

Carrying amount as of 31 Dec 20X5: 16,398 B

Excess of recoverable amount over carrying amount: 15,602 A-B
Carrying amount as of 31 Dec 20X5 had no impairment been recognized in
24,440 C
20X3 (except for goodwill):
Reversal of impairment loss: 8,042 C-B
Potential revaluation: 7,560 A-C

3. Allocation of impairment loss reversal (EUR '000)

D E= reversal*D
Allocated
Carrying
Asset % of total value impairment
amount
loss reversal
Healing springs with land 6,280 38.30% 3,080
Source of healing mud 3,624 22.10% 1,777
Spa facilities 3,140 19.15% 1,540
Sport / leisure facilities 1,932 11.78% 948
Administrative buildings 1,207 7.36% 592
Other PPE 215 1.31% 105
Total 16,398 100.00% 8,042

4. Accounting treatment

Debit PPE (healing springs with land) 3,080

Debit PPE (source of healing mud) 1,777
Debit PPE (spa facilities) 1,540
Debit PPE (sport / leisure facilities) 948
Debit PPE (administrative buildings) 592
Debit PPE (other PPE) 105
Credit Profit or loss - reversal of impairment loss -8,042
0

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