Question

Anthara Corporation had a machine whose Book value at the end of 2003 was $ 16,000...

Anthara Corporation had a machine whose Book value at the end of 2003 was $ 16,000 and a Building with Book value of $ 40,000. The undiscounted future cash flows from the Machine and the Building were estimated as $ 10,000 and $ 41,000 respectively. The fair market values of the machine and the Building were $ 9,000 and $39,000 respectively. How much should Anthara report as impairment loss for the machine and for the building in 2003?

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Answer #1

An asset is said to be impaired if its carrying value is more than its recoverable amount .Recoverable amount is higher of Fair value or value in use.

Book value (carrying value) Recoverable value Impaired Impairment loss
Machine 16000

Higher of 9000 or 10000

10000

 yes ,since carrying value is higher than recoverable amount

16000-10000

6000
Building 40000

Higher of 39000 or 41000

41000

 No ,since carrying value is less than recoverable amount 0
Total 6000
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