Prepare financial statement extract of Snowball up to 20x3 financial year. Show the impact of impairment loss on 1 January 20x8.

The carrying amounts of the assets prior to impairment are:

• Goodwill: N20 million
• Patent: N5 million
• Technology: N10 million
• Brands: N15 million
• Land: N40 million
• Buildings: N30 million
• Other net assets: N5 million

$$\text{Total Carrying Amount} = 20 + 5 + 10 + 15 + 40 + 30 + 5 = \text{N}125 \text{ million}$$

The recoverable value of the unit is N95 million.

$$\text{Impairment Loss} = \text{Total Carrying Amount} - \text{Recoverable Value}$$ $$\text{Impairment Loss} = \text{N}125 \text{ million} - \text{N}95 \text{ million} = \text{N}30 \text{ million}$$

According to IAS 36, impairment loss is allocated in the following order:

• First, to reduce the carrying amount of any asset that is specifically impaired.

• Second, to goodwill allocated to the cash-generating unit (CGU).

• Third, to the other assets of the CGU pro rata based on their carrying amounts.

• Allocation to Technology: The problem states that "technology is worthless". Loss allocated to Technology = N10 million (reducing its carrying amount from N10 million to N0). Remaining impairment loss = N30 million - N10 million = N20 million.

• Allocation to Goodwill: The remaining impairment loss is allocated to Goodwill. Loss allocated to Goodwill = N20 million (reducing its carrying amount from N20 million to N0). Remaining impairment loss = N20 million - N20 million = N0.

Since the remaining impairment loss is N0, no further allocation is needed for Patent, Brands, Land, Buildings, or Other net assets.

The table below shows the carrying amounts before and after the impairment loss allocation:

Asset	Carrying Amount Before Impairment (N'm)	Impairment Loss Allocated (N'm)	Carrying Amount After Impairment (N'm)
Goodwill	20	20	0
Patent	5	0	5
Technology	10	10	0
Brands	15	0	15
Land	40	0	40
Buildings	30	0	30
Other net assets	5	0	5
Total	125	30	95

The total carrying amount after impairment is N95 million, which equals the recoverable value.