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Answer: €17,400 (value in use).
Under IFRS, the carrying value of an asset is compared to the higher of its fair value less costs to sell (€19,100 - €1,900 = €17,200) and its value in use (€17,400). The higher of these two amounts is €17,400, which is the value in use. Since the carrying value (€20,000) exceeds this amount, the asset is impaired, and the carrying value should be adjusted to €17,400. Option A is incorrect because it represents the fair value less costs to sell, which is lower than the value in use. Option C is incorrect as it reflects the carrying value under US GAAP, where impairment is assessed based on undiscounted cash flows (€22,000), which exceed the carrying value (€20,000), indicating no impairment.
Author: LeetQuiz Editorial Team
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An analyst gathers the following information about a company's equipment: Carrying value prior to impairment: €20,000 Undiscounted expected future cash flows: €22,000 Value in use: €17,400 Fair value if sold: €19,100 Costs to sell: €1,900 The carrying value of the equipment should be:
A
€17,200 (fair value less costs to sell).
B
€17,400 (value in use).
C
€20,000 (carrying value under US GAAP).