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Machinery B
Cost (C) Rs 5,00,000
Residual Value -
Useful life 10 years
Useful life already elapsed 3 years
Yearly depreciation (D) Rs 50,000
WDV as at 31st March, 2018 [C- (D x 3)] Rs 3,50,000

(ii) Calculation of Value-in-use of Machinery A

Period Cash Flows (Rs) PVF PV
1 1,50,000 0.909 1,36,350
2 1,00,000 0.826 82,600
3 1,00,000 0.751 75,100
4 1,50,000 0.683 1,02,450
5 1,00,000 0.621 62,100
5 50,000 0.621 31,050
Value in use 4,89,650

(iii) Calculation of Fair Value less cost of disposal of Machinery A
Rs
Fair Value 7,00,000
Less: Dismantling cost (1,50,000)
Packaging cost (25,000)
Legal Fees (75,000)
Fair value less cost of disposal 4,50,000

(iv) Calculation of Impairment loss on Machinery A

Rs
Carrying Value 5,25,000
Less: Recoverable Value i.e. higher of Value-in-use and
Fair value less cost of disposal 4,89,650
Impairment Loss 35,350
Revised carrying amount of Machinery A = 4,89,650

(v) Calculation of Impairment loss of CGU

1. First goodwill will be impaired fully and then the remaining impairment loss of Rs75,000 will be
allocated to Machinery A and B.
2. If we allocate remaining impairment loss to Machinery A and B on a pro-rata basis, it would come to
Rs45,000 on Machinery A. However, the impairment loss of Machinery A cannot exceed Rs. 35,350.
Hence, impairment to CGU will be as follows:
Carrying value Impairment Carrying value
before loss Rs after impairment
impairment loss Rs loss Rs

Machinery A 5,25,000 35,350 4,89,650
Machinery B 3,50,000 39,650* 3,10,350
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