A subsidiary which is identified as a single cash generating unit (CGU)has property plant and equipment assets with a carrying amount of $100,000 and a recoverable amount of $80,000.On acquisition of the subsidiary goodwill of $60,000 was recognised.The amount to be identified as goodwill impairment loss is:
A) $100,000
B) $80,000
C) $20,000
D) $60,000

Question

Quizplus · Accepted Answer

The recoverable amount of the CGU is $80,000, which is less than its carrying amount of property plant and equipment assets of $100,000. Therefore, the impairment loss is recognized, and the carrying amount of the CGU is reduced to its recoverable amount of $80,000. Since the goodwill recognized on acquisition is $60,000, the impairment loss for goodwill should be the difference between the carrying amount of the CGU and its recoverable amount, which is $20,000. Thus the correct answer is C.

A Subsidiary Which Is Identified as a Single Cash Generating