Question 4 (20 marks)
Solstice Berhad is preparing its financial statements for the year ended 31 December 2022 and
has a number of issues to deal with regarding non-current assets.
(a) Solstice Berhad has suffered an impairment loss of RM 90,000 to one of its cash-generating
units.
The carrying amounts of the assets in the cash-generating unit prior to adjusting for impairment
are:
RM 000
Goodwill
50
Patent
10
Land and buildings
100
Plant and machinery
50
Net current assets
10
The patent is now estimated to have no value.
(b) During the year to 31 December 2022, Solstice Berhad acquired Durham Berhad for RM10
million, its tangible assets being valued at RM7 million and goodwill on acquisition being RM3
million, Assets with a carrying amount of RM2.5 million were subsequently destroyed. Solstice
Berhad has carried out an impairment review and has established that Durham could be sold
for RM6 million, while its value in use is RM5.5 million.
(c) A property originally costing RM100,000 with a 50-year life has accumulated depreciation
to date of RM20,000. The asset is to be revalued to RM130,000 at 31 December 2022.
(iv) State the double entry accounting transaction required to record the revaluation in (iii).
(3 marks)
Required:
(i) Calculate the post-impairment carrying amount of plant and machinery in (a) above. Show
all workings.
(v) Calculate the depreciation charge related to the asset in (iii) above, for the year ended 31
December 2022. Show all workings.
(5 marks)
(3 marks)
(ii) The finance director has been asked to report to the board on the reasons for the impairment
review on the cash-generating unit. State TWO internal indicators of impairment of an asset
under IAS36/MFRS 136-Impairment of Assets.
(2 marks)
(iii) Calculate the carrying amount of the goodwill in (ii) above, following the impairment
review. Show all workings.
(7 marks)
