Collinsworth LTD., a U.K. company, prepares its financial statements according t

Question

Collinsworth LTD., a U.K. company, prepares its financial statements according to International Financial Reporting Standards. Late in its 2013 fiscal year, a significant adverse change in business climate indicated to management that the assets of its appliance division may be impaired. The following data relate to the division’s assets:

What amount of impairment loss, if any, should Collinsworth recognize? (Enter your answer in millions.)

Assume that Collinsworth prepares its financial statements according to U.S. GAAP and that fair value less cost to sell approximates fair value. What amount of impairment loss, if any, should Collinsworth recognize? (Enter your answer in millions.)

( £ in millions) Book value £ 220 Undiscounted sum of estimated future cash flows 210 Present value of future cash flows 150 Fair value less cost to sell (determined by appraisal) 145

Explanation / Answer

Requirement 1

Book value - present value of future cash flows

210 - 150 = 70

Requirement 2

Book value - fair value less cost to sell

220 - 145 = 75

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