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(Solved) A cash-generating unit of a French company has a fair value of

A cash-generating unit of a French company has a fair value of €3 million. The carrying value of the unit, including goodwill of €400,000, is €3.5 million. The present value of the future expected cash flows is €3.2 million. Assuming selling costs of €350,000, the impairment loss, in accordance with IFRS, is closest to:
a. €300,000.
b. €400,000.
c. €850,000.

Solution

To determine the impairment loss for the cash-generating unit (CGU) of the French company in accordance with IFRS, we need to follow these steps:

Given Information:

  • Fair Value of CGU: €3 million
  • Carrying Value of CGU (including goodwill): €3.5 million
  • Present Value of Future Expected Cash Flows: €3.2 million
  • Selling Costs: €350,000

Step 1: Calculate the Recoverable Amount

The recoverable amount is the higher of:

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