- Company P acquires 50% of Company A for 400. It is accounted as an associate in accordance with IAS 28.
- A has one single asset with a book value of 100. The fair value of this asset is 800.
- There has been no depreciation, impairments or any other results.
A then performs an impairment test over these two assets. Asset A’s recoverable value is 520 and B’s is 320. No impairment is recorded by A.
My question is whether P should now be treating this asset as two different assets as well? Or should it continue to treat as ‘one’ asset?
The answer to this would have implications for P recording its share of an adjusted impairment expense in accordance with IAS 28.32. If P still treats it as ‘one’ asset, then the total recoverable value of the asset exceeds the carrying value and there is no impairment. But if P also splits it up in to two assets, then it would have to record a loss due to the impairment in Asset B of 40 = 50% of (400-320).
I've tried to better illustrate this in the attachment.
Thank you in advance.