In accordance with IAS 36: Impairment of Assets, explain which of the following would require an impairment test to be performed during the year ended 31 December 2019 on assets or cash-generating units or at group level in respect of Timtim Ltd (Timtim):
i) A fall in the benchmark interest rate used by the lender to calculate interest due on Timtim’s loans payable, its main form of finance.
ii) Acquisition by Timtim of 100% of another entity in 2018 at a price substantially above the fair value of the entity’s net assets. The entity acquired was not sold in 2019.
iii) Sanctions put in place restricting exports by Timtim to a major client.
iv) Increase in the tax rate applied to Timtim.
(Note: You should consider each event independently). (4 marks)

Due to a change in Pusiga Ltd’s production plans, an item of machinery with a carrying value of GH¢11 million at 31 December 2017 (after adjusting for depreciation for the year) may be impaired due to a change in use. An impairment test conducted on 31 December 2017, revealed its fair value less cost of disposal to be GH¢5 million. The machine is now expected to generate
an annual net income of GH¢2 million for the next three years at which point the asset would be sold for GH¢2.4 million. An appropriate discount rate is 10%. Pusiga charges depreciation at 20% on reducing balance method on machinery.
Note:

• The present value of ordinary annuity of GH¢1 at 10% for one year, two years and three years are 0.909,1.736 and 2.487 respectively.
• The present value of GH¢1 at 10% for one year, two years and three years 0.909, 0.826 and 0.751 respectively

Required:
In accordance with IAS 36: Impairment of Assets, explain with justification the required accounting treatment in the financial statements of Pusiga Ltd for the year ended 31 December 2017.                                                                                       (3 marks)

Devine Education Ltd acquired an item of plant at a cost of GH¢800,000 on 1 April 2016. The plant had an estimated residual value of GH¢50,000 and an estimated useful life of five years, neither of which has changed. Devine Education Ltd uses straight-line depreciation.
On 31 March 2018, Devine Education Ltd was informed by a major customer (who buys products produced by the plant) that it would no longer be placing orders with Devine Education Ltd. Even before this information was known, Devine Education Ltd had been having difficulty finding work for this plant. It now estimates that net cash inflows earned from the plant for the next three years will be:

Year ended:                                           GH¢’000
31 March 2019                                         220.00
31 March 2020                                         180.00
31 March 2021                                         170.00
Devine Education Ltd has confirmed that there is no market in which to sell the plant as at 31 March 2018, but is confident that it can still be sold for its original estimated realisable value on 31 March 2021. Devine Education Ltd’s cost of capital is 10% and the following values should be used:
Value of GH¢1 at:                                  GH¢
End of year 1                                          0.91
End of year 2                                          0.83
End of year 3                                          0.75
Required:
In line with IAS 36: Impairment of Assets, calculate the carrying amounts of the asset above as at 31 March 2018 after applying any impairment losses. (Note: Calculations should be to the nearest GH¢1,000)                                                          (6 marks)

Ayariga Ltd acquired its head office on 1 January 2007 at a cost of GH¢10 million (excluding land). The company’s depreciation policy is to depreciate property over 50 years on a straight line basis. Estimated residual value is zero.
On 31 December 2011, Ayariga Ltd revalued the non-land element of its head office to GH¢16 million. In accordance with IAS 16 Property, Plant and Equipment the company has decided not to transfer annual amounts out of revaluation reserves as assets are used. In January 2017 storm damage occurred and the recoverable amount of the head office property (excluding land) was estimated at GH¢5.8 million.
Required:
In accordance with IAS 36 Impairment of Assets, recommend (with workings) how the above transaction should be accounted for as at 1 January, 2017.                                                                                                                                                (5 marks)