Page 6 - 10. COMPILER QB - INDAS 36

Q3 (May 19)

Elia limited is a manufacturing company which deals in manufacturing of cold drinks and beverages. It has
various plants across India. There is Machinery A in the Baroda plant which is used for the purpose of
bottling. There is one more machinery which is Machinery B clubbed with Machinery A. Machinery A can
individually have an output and also be sold independently in the open market. Machinery B cannot be sold in

isolation and without clubbing with Machine A it cannot produce output as well. The Company considers this
group of assets as a Cash Generating Unit and an Inventory amounting to Rs 2 Lakh and Goodwill amounting
to Rs 1.50 Lakhs is included in such CGU. Machinery A was purchased on 1st April 2013 for Rs 10 Lakhs and
residual value is Rs 50 thousand. Machinery B was purchased on 1st April, 2015 for Rs 5 Lakhs with no
residual value. The useful life of both Machine A and B is 10 years. The Company expects following cash flows

in the next 5 years pertaining to Machinery A. The incremental borrowing rate of the company is 10%.
Year Cash Flows from Machinery A
1 1,50,000
2 1,00,000
3 1,00,000
4 1,50,000
5 1,00,000 (excluding Residual Value)
Total 6,00,000
On 31st March, 2018, the professional valuers estimated that the current market value of Machinery A is Rs 7
lakhs. The valuation fee was Rs 1 lakh. There is a need to dismantle the machinery before delivering it to the
buyer. Dismantling cost is Rs 1.50 lakhs. Specialised packaging cost would be Rs 25 thousand and legal fees
would be Rs 75 thousand.

The Inventory has been valued in accordance with Ind AS 2. The recoverable value of CGU is Rs 10 Lakh as on
31st March, 2018. In the next year, the company has done the assessment of recoverability of the CGU and
found that the value of such CGU is Rs 11 Lakhs i.e. on 31st March, 2019. The Recoverable value of Machine A
is Rs 4,50,000 and combined Machine A and B is Rs 7,60,000 as on 31st March, 2019.

Required:
a) Compute the impairment loss on CGU and carrying value of each asset after charging impairment loss for
the year ending 31st March, 2018 by providing all the relevant working notes to arrive at such calculation.
b) Compute the prospective depreciation for the year 2018-2019 on the above assets.
c) Compute the carrying value of CGU as at 31st March, 2019.

SOLUTION
(a) Computation of impairment loss and carrying value of each of the asset in CGU after impairment loss
(i) Calculation of carrying value of Machinery A and B before impairment

Machinery A
Cost (A) Rs 10,00,000
Residual Value Rs 50,000
Useful life 10 years
Useful life already elapsed 5 years
Yearly depreciation (B)[(10,00,000-50,000)/10] Rs 95,000
WDV as at 31st March, 2018 [A- (B x 5)] Rs 5,25,000

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