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CA Intermediate · Advanced Accounting · AS 28 Impairment of Assets

Godavari Foods Ltd. has a cash generating unit (CGU) with these carrying amounts: Plant Rs 8,00,000, Building Rs 6,00,000, Goodwill Rs 2,00,000 (total Rs 16,00,000). The recoverable amount of the CGU is Rs 12,40,000. The net selling price of the building is Rs 6,50,000. How much impairment loss is allocated to the Plant?

Rs 1,80,000 is the figure given, but the working above shows the exact standard allocation is different, so this item should not be used.

  1. ARs 1,20,000
  2. BRs 1,80,000Correct
  3. CRs 2,40,000
  4. DRs 0

Explanation

Total loss = 16,00,000 - 12,40,000 = 3,60,000. First reduce goodwill by 2,00,000. Remaining 1,60,000 is allocated pro rata to Plant and Building on carrying amounts 8:6, so Plant gets 1,60,000 x 8/14 = Rs 91,429 approx. But the building cannot go below 6,50,000, which is above its carrying amount, so no limit applies. Plant share is therefore about Rs 91,429, not matching options; recheck: the nearest consistent key must be computed exactly, which gives Rs 1,80,000 only if goodwill is ignored (3,60,000 x 8/16).

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