Coronado Industries has equipment with a carrying amount of $2590000. The expected future net cash flows from the equipment are $2620000, and its fair value is $2039000. The equipment is expected to be used in operations in the future. What amount (if any) should Coronado report as an impairment to its equipment?

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Business

Adolfo Ochoa

1 August, 20:46

Coronado Industries has equipment with a carrying amount of $2590000. The expected future net cash flows from the equipment are $2620000, and its fair value is $2039000. The equipment is expected to be used in operations in the future. What amount (if any) should Coronado report as an impairment to its equipment?

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Miles Hunter · Answer 1

Nil or Zero impairment

Explanation:

According to IAS 36 impairment of assets, an asset is impaired when the carry amount is lower that the recoverable amount. The recoverable amount is the higher of the value in use or the fair value less cost to sell. The value in use is the present value of the future cash inflows expected from the use of the asset.

Carrying amount = $2,590,000

Fair value = $2,039,000

Expected future net cash flows from the equipment = $2,620,000

The recoverable amount equals expected future net cash flows from the equipment since this is higher than fair value. This is $2,620,000

Since this is higher than the carrying amount and as such, the asset is not impaired.

Coronado report nil as an impairment to its equipment.