IAS 36 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
- Exercises
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Recoverable amount: fair value less costs of disposal and value in use
Professional file: annual impairment review of an industrial group
Section 1 of 8
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IAS 36 workpaper
- Level
- Expert
- Estimated time
- ≈ 45 min
- Progress
- 0 / 4 steps done (review excluded)
Context
Corvenne Industries (a fictitious group) manufactures fluid-handling equipment. The group closes its year on 31 December, applies the cost model to its non-current assets and monitors three activities: industrial pumps (unit A), valves (unit B) and maintenance services (unit C). In 20X3 it acquired Hydra Pompes: the goodwill and the Hydra brand, with an indefinite useful life, arising from that business combination are in the statement of financial position. A shared IT services centre serves the three units. You are in charge of the annual impairment review file at 31 December 20X5: indicator review, identification of units, recoverable amount, allocation of losses, reversal of a prior loss, entries, disclosure note, replies to the reviewer's notes and conclusion. The measurements made under IFRS 13, the measurement of goodwill under IFRS 3 and the treatment of any restructuring plan under IAS 37 are given data; deferred tax effects (IAS 12) are outside the scope of the file.
Assignment
Workpaper Recoverable amount of the Pumps unit.
Purpose of the workpaper
Determine fair value less costs of disposal (only incremental costs not recognised as liabilities), project the value-in-use cash flows for the asset in its current condition (without uncommitted restructuring, financing or tax), discount them at the pre-tax rate, retain the higher of the two amounts and document the key assumptions.
Questions of the file covered by this workpaper
- Can the projections of the Pumps unit be used as they stand?
- Calculate the value in use of the Pumps unit.
- Which discount rate do you retain? Reply to management's proposal.
- Determine the recoverable amount of the Pumps unit.
Documents in the file
Open the documents to pick out the relevant information.