Question

Impairment--Natalie Lui Corp is an international Company that uses IFRS. She owns machinery with a book value of $450,000. it is estimated that the machinery will generate future non-discounted cash flows of $350,000 and discounted cash flows of $400,000. the machinery has a fair value of $300,000. Natalie should recognize a loss on impairment a of assuming she is using IFRS. A. $150,000 B. $100.000 C. $50,000 D. 0

Answer 1

Answer:

C. $50,000

Explanation:

Under IFRS section IAS 36, an impairment loss results from an asset's carrying value being lower than its fair market value or value in use. In this case, the fair market value of the asset (the price at which it could be sold) is $300,000,  while its value in use is $400,000 (discounted to present value). In order to calculate the impairment loss, we must use the highest, in this case the value in use.

Impairment loss = $450,000 (carrying value) - $400,000 (value in use) = $50,000