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CA Final · Financial Reporting · Ind AS 36 Impairment of Assets

Anand Pharma Ltd. tests a CGU for impairment. The CGU has estimated future cash flows that include a Rs 15 lakh cash inflow expected from a future restructuring to which the company is not yet committed. How should this be treated in estimating value in use?

The inflow should be excluded. Value in use reflects the asset in its current condition, and cash flows from a future restructuring to which the entity has not yet committed are not included in the estimate.

  1. AInclude it because the benefit is probable
  2. BInclude it at 50% as a prudent estimate
  3. CExclude it because the restructuring is not yet committedCorrect
  4. DInclude it only in the discount rate

Explanation

Value in use is based on the asset in its current condition and excludes cash flows from a future restructuring to which the entity is not yet committed. Hence the Rs 15 lakh is excluded. Including it, even partly, would overstate value in use.

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