Page 4 - 10. COMPILER QB - INDAS 36

(b) the carrying amount that would have been determined (net of amortization or depreciation) had no
impairment loss been recognised for the asset in prior accounting periods.
Hence impairment loss reversal is restricted to Rs 747 lakhs only.

Q2 (Nov. 18)

M Ltd. has three cash-generating units: A, B and C. Due to adverse changes in the technological environment,
M Ltd. conducted impairment tests of each of its cash-generating units. On 31st March, 2018, the carrying
amounts of A, B and C are Rs100 lakhs, Rs150 lakhs & Rs200 lakhs respectively.
The operations are conducted from a headquarters. The carrying amount of the headquarter assets is Rs200
lakhs: a headquarter building of Rs150 lakhs and a research center of Rs50 lakhs. The relative carrying

amounts of the cash-generating units are a reasonable indication of the proportion of the head-quarter
building devoted to each cash-generating unit. The carrying amount of the research center cannot be allocated
on a reasonable basis to the individual cash-generating units.
Following is the remaining estimated useful life of:
A B C Headquarter assets
Remaining estimated useful life 10 20 20 20
The headquarter assets are depreciated on a straight-line basis.

The recoverable amount of each cash generating unit is based on its value in use since net selling price for
each CGU cannot be calculated. Therefore, Value in use is equal to
A B C M Ltd. as a whole
Recoverable amount 199 164 271 720*
*The research centre generates additional future cash flows for the enterprise as a whole. Therefore, the sum
of the value in use of each individual CGU is less than the value in use of the business as a whole. The

additional cash flows are not attributable to the headquarters building.
Calculate and show allocation of impairment loss as per IND AS 36. Ignore tax effects.
SOLUTION

1. Identification of Corporate Assets of M Ltd.
Here, the corporate assets are the headquarters building and the research centre.
For corporate building
Since, the carrying amount of the headquarter building can be allocated on a reasonable and consistent

basis to the cash-generating units under review. Therefore, only a ‘bottom-up’ test is necessary for a
research centre.
Since the carrying amount of the research centre cannot be allocated on a reasonable and consistent
basis to the individual CGU under review. Therefore, a ‘top-down’ test will be applied in addition to the
‘bottom-up’ test.

2. Allocation of Corporate Assets
Since the estimated remaining useful life of A’s CGU is 10 years, whereas the estimated remaining useful
lives of B and C’s CGU are 20 years, the carrying amount of the headquarters building is allocated to the
carrying amount of each individual cash-generating unit on a weight basis.

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