Cobalt Ridge’s crusher (cost 800,000, accumulated depreciation 300,000) has a carrying amount of 500,000. Its recoverable amount is 380,000. Record the impairment loss under IFRS.

Answer

Dr Impairment Loss 120000; Cr Accumulated Depreciation—Crusher 120000

Accounts - Impairment Loss - Accumulated Depreciation—Crusher - Crusher - Depreciation Expense - Loss on Disposal - Revaluation Surplus Loss = carrying amount − recoverable amount = 500,000 − 380,000 = 120,000, an expense in profit or loss. The credit is Accumulated Depreciation (this course’s convention), leaving cost at 800,000 and the carrying amount at 380,000. Crediting Crusher directly is the trap — it loses the cost figure the PP&E note discloses; Depreciation Expense misnames the loss; Revaluation Surplus belongs to the revaluation model, not the cost model.

L1 §10.3.1; LI §8.5; IAS 36 ¶59–63 (verified-facts 2.5-5)