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

Kaveri Ltd. has a CGU with these carrying amounts: goodwill Rs 20 lakh, plant Rs 60 lakh, building Rs 40 lakh and inventory Rs 30 lakh (inventory is within Ind AS 2 and is carried at its own measurement). Recoverable amount of the CGU, taken as including all assets, is Rs 110 lakh. Total carrying amount of the CGU is Rs 150 lakh. How much impairment loss is allocated to the plant after the goodwill is reduced first? Assume plant fair value less costs of disposal is not higher than its pro rata carrying amount and the allocation is pro rata to the Ind AS 36 assets in scope.

Plant bears Rs 12 lakh. Total loss is Rs 40 lakh, of which Rs 20 lakh first reduces goodwill. The remaining Rs 20 lakh is shared pro rata between plant and building in the ratio 60:40, giving the plant Rs 12 lakh.

  1. ARs 12 lakhCorrect
  2. BRs 20 lakh
  3. CRs 24 lakh
  4. DRs 16 lakh

Explanation

Total loss = 150 - 110 = Rs 40 lakh. Goodwill is reduced first by Rs 20 lakh. Remaining Rs 20 lakh is allocated pro rata to the plant and building only, since inventory is outside the allocation (60:40). Plant gets 20 x 60/100 = Rs 12 lakh. Rs 24 lakh wrongly allocates the whole Rs 40 lakh pro rata without reducing goodwill first.

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