Allocation of a group's loss

Learning objectives

• Allocate the loss of a disposal group to its assets within the measurement scope, in the order of allocation set out in IAS 36, without affecting items outside that scope.L3, L4
• Determine the order of allocation (IFRS 5 refers to IAS 36) in a case with items outside the measurement scope, and justify the convention adopted regarding any floor per asset.L4

Normative references

• IFRS 5 §23The impairment loss (or any subsequent gain) of a disposal group reduces (or increases) the carrying amount only of the non-current assets in the group within the measurement scope of IFRS 5, in the order of allocation set out in IAS 36 (paras 104(a) and (b) and 122); the other assets and the liabilities are not adjusted.

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

3 questions

• A disposal group of Hallen suffers an impairment loss of {group_loss}. Within the measurement scope it includes a machine ({machine}), a building ({building}) and a patent ({patent}), as well as a financial asset outside the measurement scope ({financial_asset}). Case convention: the group contains no goodwill and the loss is allocated pro rata to the carrying amounts of the assets within the measurement scope, with no floor per asset. Calculate the loss allocated to each of the three assets.L3
• Kerval classifies a disposal group and recognises a loss of {group_loss} after measuring the group. The group contains equipment ({equipment}) and software ({software}), both within the measurement scope, and a deferred tax asset ({deferred_tax_asset}) that is excluded from it. Case convention: no goodwill in the group, allocation pro rata to the carrying amounts of the assets in scope, with no floor. What loss is allocated to the equipment and to the software?L4
• The disposal group of Zindal has a carrying amount of {group_carrying_amount} after prior remeasurement, and a fair value less costs to sell of {group_fvlcts}. Case convention: the loss is entirely allocated to the non-current assets within the measurement scope. Post the entry for the allocated loss.L4