Paper 3 · June 2019 · Statement of Changes in Equity

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

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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