CERTYNEX IFRS ACADEMY

Ondine tests a rolling mill with a carrying amount of 1,800,000. A firm offer from a buyer results in a fair value less costs of disposal of 2,100,000. The management controller proposes to also build a value in use model, whose expected result is about 1,600,000, and then to recognise an impairment loss of 200,000. What should be concluded?

Value in use must first be calculated, then the lower of the two amounts used as recoverable amount, i.e. 1,600,000, and the corresponding loss recognised.

The controller is right: the impairment loss of 200,000 must be recognised.

The rolling mill is not impaired: its fair value less costs of disposal already exceeds its carrying amount, so value in use need not be calculated.

The average of the two measures, i.e. 1,850,000, must be used, and no loss is recognised.