b The carrying amounts of the assets of a cashgenerating uni

b) The carrying amounts of the assets of a cash-generating unit (CGU) are as follows: Goodwill Patents and copyrights Property, pla £m 25 50 200 275 nt and equipment There are indications that this CGU is impaired and therefore its recoverable amount has been determined. The CGU\'s recoverable amount is £195million. Value in use cannot be ascertained for any of the assets, but fair value less costs to sell is £20million for the patents and copyrights and £160million for the property, plant and equipment. You are required to: (i) Calculate the amount of impairment loss for the CGU PTO Page 2 of 7 (i) Explain the procedure based on which an impairment loss for a CoU should be allocated among the CGU\'s assets, according to IAS 36 Impairment of Assets. (ii) With reference to the example above, show how the impairment loss should be allocated among the CGU\'s assets. 12 marks

Solution

An Impairment loss is recognised to the extent the carrying amount of the asset exceeds its recoverable amount.

(ii). When CGU or group of CSUs, to which goodwill is allocated is tested for impairmen, any impairement loss is allocated first to reduce the carrying amount of the goodwill. The remaining loss ( if any) is then allocated to other assets of the CGU pro rata on the basis of the carrying amount of each asset in the CGU.