Paper 3 · Statement of changes in equity / impairment

An item of machinery had a carrying value of $100 000. Following an impairment review, it could be sold for$ 65 000 (fair value less costs to sell), and its value in use was $70 000. At what amount should the machine be shown in the statement of financial position after the impairment review?

Model answer

$70000

Also accepted: 70000, $70 000, 70 000, $70,000, 70,000

Explanation: Recoverable amount is the higher of fair value less costs to sell (

65 000) and value in use (

70 000), so recoverable amount =

70 000. The machine is written down from

100 000 to this recoverable amount of $70 000.

Derived from ZIMSEC Accounting Paper 3, June 2019, Q1

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