Depreciation and deferred tax after impairment

Learning objectives

• Calculate the depreciation (amortisation) charge for future periods on the impaired carrying amount, less the residual value, over the remaining useful life.L2, L3
• Explain the effect of the loss on deferred taxes (comparison of the revised carrying amount with the tax base in accordance with IAS 12).L3

Normative references

• IAS 36 §63After an impairment loss, the depreciation (amortisation) charge for future periods is recalculated on the revised carrying amount, less the residual value, over the remaining useful life.
• IAS 36 §64The related deferred taxes are determined in accordance with IAS 12 by comparing the revised carrying amount with the tax base (Illustrative Example 3).

Original summaries of the paragraphs (reference register), never a quotation of the standard.

9 questions

• After an impairment loss has been recognised on a depreciable item of equipment, on what basis is the depreciation charge for subsequent periods computed?L2
• At the end of 20X1, Ardéliane impaired an industrial boiler, now carried at {revised_carrying_amount}. Its residual value is estimated at {residual_value} and its remaining useful life at {remaining_useful_life}. It is depreciated on a straight-line basis. What is the depreciation charge for 20X2?L2
• Quintessa acquired for {original_cost} a licence to use a cosmetics brand. After an impairment loss, the licence is carried at {revised_carrying_amount}; it has {remaining_useful_life} of use left and its residual value is {residual_value}. Compute the annual straight-line amortisation from the following period.L2
• A cable car at the Valmorine resort cost {cost}. It is depreciated on a straight-line basis over {useful_life}, with a residual value of {residual_value}. After {years_elapsed} of operation, a lasting fall in visitor numbers leads to an estimated recoverable amount of {recoverable_amount}; the residual value and the total useful life are unchanged. Compute the impairment loss, then the annual depreciation charge for the following years.L3
• A printing company, Typhanie, impaired a rotary press at the end of 20X1; its carrying amount now stands at {revised_carrying_amount}. The residual value is {residual_value} and the remaining useful life is {remaining_useful_life}. Record the straight-line depreciation entry for 20X2.L2
• At 1 January 20X3, a flight simulator of the Aéralis school shows a cost of {cost}, accumulated depreciation of {accumulated_depreciation} and accumulated impairment losses of {accumulated_impairment}, recognised at the end of 20X2. Its residual value is estimated at {residual_value} and it has {remaining_useful_life} of use left. Record the straight-line charge for 20X3.L3
• Velloria recognises an impairment loss of 30,000 on an item of equipment, whose carrying amount falls from 100,000 to 70,000. The tax base of the equipment, set by tax rules, remains 100,000 (given). How are the deferred taxes relating to this equipment determined?L3
• Before impairment, a recycling unit of Ecomira had a carrying amount of {carrying_amount_before}. The entity recognises an impairment loss of {impairment_loss}. The tax base of the unit, which the loss does not change under the applicable tax rules (given), is {tax_base}. What is the revised carrying amount to be compared with the tax base, and by how much does the tax base now exceed it?L3
• Trans-Iroise acquires a refrigerated truck on 1 January 20X1 for {cost}, depreciated on a straight-line basis over {useful_life} years with no residual value. At the end of 20X2, after the depreciation for the year, it recognises an impairment loss of {impairment_loss}; the remaining useful life is unchanged. At the end of 20X4, after the depreciation for the year and following a change in estimates, the truck's recoverable amount is {recoverable_amount}. Calculate the reversal at the end of 20X4 and the truck's carrying amount after the reversal.L3