Question

WebHelper Inc. acquired 100% of the outstanding stock of Silicon Chips Corporation (SCC) for $46.6 million, of which $18.2 million was allocated to goodwill. At the end of the current fiscal year, an impairment test revealed the following: fair value of SCC, $43.2 mllion fair value of SCC's net assets (excluding goodwill), $32.6 million; book value of SCC's net assets (including goodwill), $46.8 million. What amount of impairment loss should WebHelper recognize? (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Impairment loss million

Answer 1

Solution: $3.6 million

Working:

Under IFRS, the impairment loss refers to the difference between book value and the recoverable amount related to cash-generating unit. Here recoverable amount is $43.2 million, the higher of the $32.6 million value-in-use (PV of estimated future cash flows) and the $43.2 million fair value minus costs to sell.

Book value : $46.8 million

Minus: Recoverable amount: $43.2 million

Impairment loss: $3.6 million