Reversal of Impairment on an individual assets within a CGU

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Hussein
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Joined: 10 Oct 2022, 22:59

Reversal of Impairment on an individual assets within a CGU

Post by Hussein »

Hi,

In the previous year there was an impairment of a CGU. One of the assets in the CGU is land and impairment was allocated to it and to other assets as well.

Now, in the current year, there is no indication of further impairment nor reversal of impairment, that is, impairment of CGU remains same. The land included in the CGU is kept under revaluation model and in the current year a valuation report has been obtained showing an increase in the value of the land. How should this be accounted for? If I reverse the impairment on the land it means that i am also reversing impairment on the CGU. Should I reverse impairment on the land and then reallocate it to another asset under the CGU? Or should I reperform and reallocate the impairment of the CGU? Not too sure about it.

Now lets assume another scenario. Suppose, like in the case above, I receive the valuation report showing an increase in the value of the land. At the same time, it is noted that impairment on the CGU as a whole should be reversed. In that case, what should I do?
JRSB
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Re: Reversal of Impairment on an individual assets within a CGU

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Marek Muc
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Re: Reversal of Impairment on an individual assets within a CGU

Post by Marek Muc »

When allocating impairment to assets, their carrying amount cannot be lower than their fair value less cost of disposal. So if land is carried at fair value, then you don't allocate impairment loss at CGU level to it.
If you computed recoverable amount of CGU as value in use, then increase in fair value of land doesn't impact value in use of the CGU, so that increase isn't a reversal of CGU impairment. Makes sense?
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