321 / 488
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Wiley IFRS: Practical Implementation Guide and Workbook
Solution
Goodwill
Property
Plant
Total
$In.
$In.
$In.
$In.
Carrying value
10
20
30
60
Impairment loss
um
ill
ill
ill}
Carryingvalue after impairment
-
is
27
45
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.
Case Study 12
Facts
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
Total
$In.
560
160
720
Net assets
$In.
560
160
720
Carryingamount (700 - 20% of 700)
Reversal of impairment loss
Carryingamount after reversalof impairment loss
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.