CERTYNEX IFRS ACADEMY

The kaolin mine of Kaolys forms a CGU. Its assets have a carrying amount of 3,000,000; a restoration provision of 700,000 is recognised, and any buyer would have to assume it. The mine's fair value less costs of disposal, obligation included, is 2,500,000; value in use excluding restoration outflows is 2,600,000. The controller compares 2,500,000 with 3,000,000 and proposes an impairment loss of 500,000. Which conclusion is correct?

The controller is right: an impairment loss of 500,000 must be recognised.

Carrying amount to be compared of 2,300,000, recoverable amount of 2,500,000: no impairment loss.

The provision must also be deducted from fair value, giving 1,800,000, hence an impairment loss of 500,000 against 2,300,000.

Fair value is disregarded because it includes a liability; the net value in use of 1,900,000, compared with 2,300,000, leads to an impairment loss of 400,000.