Berry Pty Ltd has two cash generating units. CGU A had a carrying amount of $1700 and value in use of $1750. CGU B has a carrying amount of $1900 and a value in use of $1800. The carrying amount of the head office assets is $1400. CGU A and B utilise the head office services equally. The impairment loss for CGU A is:

A) $0.
B) $650.
C) $800.
D) $1350.

Question

Amaan Shaikh · Accepted Answer

Final Answer : B, Explanation :  The impairment loss for a CGU is calculated as the difference between the carrying amount and the recoverable amount, which is the higher of the fair value less costs to sell and the value in use.For CGU A, the value in use ($1750) is higher than the carrying amount ($1700). Therefore, there is no impairment loss for CGU A.For CGU B, the carrying amount ($1900) is higher than the value in use ($1800). The impairment loss is calculated as $1900 - $1800 = $1000. However, we also need to consider the allocation of the head office assets. Since both CGUs utilize the head office services equally, we need to allocate the carrying amount of the head office assets ($1400/2 = $700) to each CGU. Therefore, the carrying amount for CGU B becomes $1900 + $700 = $2600, and the impairment loss is $2600 - $1800 = $800.Hence, the correct answer is B.

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