Plethora plc
The draft financial statements of Plethora plc for the year to 31 December 20X9 are being prepared and the accountant has requested your advice on dealing with the following issues
a) Plethora plc has an administration building which it no longer needs following a delayering exercise. On 1 July 20X9 Plethora plc entered into an agreement to let the building out to another company. The building cost $600,000 on 1 January 20X0 and is being depreciated over 50 years. Plethora plc applies the fair value model under IAS 40 and the fair value of the building was judged to be $800,000 on 1 July 20X9. This valuation had not changed at 31 December 20X9.
Another building has been let out for a number of years. It had a fair value of $550,000 at
31 December 20X8 and $740,000 at 31 December 20X9.
Required
Explain how these two buildings should be accounted for in the financial statements of Plethora plc for the year to 31 December 20X9 and quantify the amounts involved.
b) Plethora plc owns a retail business which has suffered badly during the recession. Plethora plc treats this business as a separate cash generating unit.
The carrying amounts of the assets comprising the retail business are:
| |
$'000
|
|
Building
|
900
|
|
Plant and equipment
|
300
|
|
Inventory
|
70
|
|
Other current assets
|
130
|
|
Goodwill
|
40
|
An impairment review has been carried out as at 31 December 20X9 and the recoverable amount of the cash generating unit is estimated at $1.3m.
Required
Restate the carrying amounts of the assets of the retail business after accounting for the result of the impairment review.