IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

312

Wiley IFRS: Practical Implementation Guide and Workbook

Solution

Goodwill

Property

Plant

Total

$In.

$In.

$In.

$In.

Carrying value Impairment loss

10 um

20 ill

30

60

ill

ill}

Carryingvalue after impairment

45

is

27

-

15. REVERSAL OF AN IMPAIRMENT LOSS 15.1 At each reporting date, an entity should determine whether an impairment loss recognized in the previous period may have decreased. This does not apply to goodwill. 15.2 In determining whether an impairment loss has reversed, the entity should consider the same sources of information as for the original impairment loss. 15.3 An impairment loss may be reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss had been recognized. If this is the case, then the carrying amount of the asset shall be increased to its recoverable amount. The increase will effect ively be the reversal of an impairment loss. 15.4 However, the increase in the carrying value of the asset can only be up to what the carryi ng amount would have been if the impairment had not occurred. 15.5 Any reversal of an impairment loss is recognized immediately in the income statement un– less the asset is carried at a revalued amount; in this case, the reversal will be treated as a re– valuation increase. 15.6 The reversal of an impairment loss may require an adjustment to the depreciation of the asset in future periods. December 31, 20X4-carrying value Impairment The calculation refers to an impairment loss suffered by subsidiary Zen at December 31, 20X4: Goodwill Net assets Total $In. $In. $In. 300 900 1200 (300) (200) (500) _ 700 .1QQ There has been a favorable change in the esti mates of the recoverable amount of Zen ' s net asse ts since the impairment loss was recognized. The recoverable amo unt is now $800 million at December 31, 20X5 . The net asse ts' carrying value wou ld have been $720 million at December 31, 20X5. Assets are depreciated at 20% reducing balance. Required Show the accou nting treatment for the reversal of the impairment loss as of December 31, 20X5. Solution The reversal of the impai rment loss on goodwill cannot be acco unted for under lAS 36. The carrying amo unt of Ze n can be increased up to the lower of the recoverable amount ($800 million) and the carry – ing value ($720 million) of the net assets. Carrying amount of Zen's net assets at December 31, 20X5: Goodwill $In. Total $In. Net assets $In. Case Study 12 Facts

Carryingamount (700 - 20% of 700) Reversal of impairment loss Carryingamount after reversalof impairment loss

560 160 720

560 160 720