Page 12 - 10. COMPILER QB - INDAS 36

SOLUTION

Ignoring depreciation, the loss that would be reported in the Profit & Loss as a result of the impairment is
as follows:
₤
*Carrying value at balance sheet date-US$ 16,20,000 @ ₤ 1.8 = 9,00,000
Historical cost- US$ 18,00,000 @ ₤ 1.6 = 11,25,000
Impairment loss recognised in profit and loss (2,25,000)

The components of the impairment loss can be analysed as follows:
Change in value due to impairment = US$ 1,80,000# @ ₤ 1.8 = (1,00,000)
Exchange component of change =
US$ 18,00,000 @ 1.8 – US$ 18,00,000 @ ₤ 1.6 (1,25,000)
* Recoverable Amount being less than cost becomes the Carrying Value.
# 18,00,000-16,20,000 = 1,80,000

Q7 (May. 21)
On 31 March 20X1, Vision Ltd acquired 80% of the equity shares of Mission Ltd for Rs.190 million. The fair

values of the net assets of Mission Ltd that were included in the consolidated statement of financial position
of Vision Ltd at 31 March 20X1 were Rs.200 million. It is the Group’s policy to value the non-controlling
interest in subsidiaries at the date of acquisition at its proportionate share of the fair value of the
subsidiaries’ identifiable net assets.

On 31 March 20X4, Vision Ltd carried out its annual review of the goodwill on consolidation of Mission Ltd
and found evidence of impairment. No impairment had been evident when the reviews were carried out on 31
March 20X2 and 31 March 20X3. The review involved allocating the assets of Mission Ltd into three cash
generating units and computing the value in use of each unit. The carrying values of the individual units before
any impairment adjustments are given below.
Unit A Unit B Unit C
Rs. in million Rs. in million Rs. in million
Intangible assets 30 10 -
Property, Plant and Equipment 80 50 60
Current Assets 60 30 40
170 90 100
Carrying Values 180 66 104

Total Value in use of unit

It was not possible to meaningfully allocate the goodwill on consolidation to the individual cash generating
units but all the other net assets of Mission Ltd are allocated in the table shown above.
The intangible assets of Mission Ltd have no ascertainable market value but all the current assets have a
market value that is at least equal to their carrying value. The value in use of Mission Ltd as a single cash-

generating unit on 31 March 20X4 is Rs.350 million.
Discuss and compute the accounting treatment of impairment of goodwill as per Ind AS 36?

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