The Assets of the Aerospace Inc On December 31st, 2013, the Fair Values of the Assets

question 63

Multiple Choice

The assets of the Aerospace Inc. (a separately incorporated entity fully owned subsidiary of ABC Transport Inc.) showed the following asset carrying values on December 31st, 2013 (in millions) : $\begin{array}{|l|l|}\hline \text { Cash } & \$ 100 \\\hline \text { Accounts Receivable } & \$ 20 \\\hline \text { Inventories } & \$ 10 \\\hline \text { Property. Plant \& Equipment (net) } & \$ 200 \\\hline \text { Patents (net) } & \$ 20 \\\hline \text { Goodwill } & \$ 75 \\\hline & \\\hline \text { Total } & \$ 425 \\\hline\end{array}$
On December 31st, 2013, the fair values of the assets listed above were as follows:
$\begin{array}{|l|l|}\hline \text { Cash } & \$ 100 \\\hline \text { Accounts Receivable } & \$ 15 \\\hline \text { Inventories } & \$ 25 \\\hline \text { Property. Plant \& Equipment (net) } & \$ 120 \\\hline \text { Patents (net) } & \$ 60 \\\hline & \\\hline \text { Total } & \$ 320 \\\hline\end{array}$
Both ABC and Aerospace Inc. adhere to IFRS.

-Assume that ABC Inc. has a single asset with a historical cost of $100 and accumulated amortization of $50. The asset could be sold today for $60 less a 10% sales commission. Alternatively, ABC could use the asset to generate discounted operating cash flows of $40 throughout its remaining useful life and then sold for discounted proceeds amounting to $4. Assuming that ABC adheres to IFRS, is the asset impaired?

• A) No, there is no impairment since the asset's recoverable amount exceeds its carrying value by $4.
• B) Yes, the asset is impaired by $4.
• C) Yes, the asset is impaired by $6.
• D) The answer cannot be determined, since the carrying values of the CGU's other assets and liabilities must be determined.

---

Definitions:

Cease Operation

The act of halting all business activities permanently or temporarily.

Insurer Repairs

Repairs made to a policyholder's property or vehicle, funded by their insurance company following a claim.

Insured

A person or entity covered by an insurance policy, which provides financial protection against loss or harm.

Damaged Goods

Merchandise that is broken, defective, or otherwise impaired, reducing its value or utility.