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An entity has a mine (CA ₹1,000) with a recognised restoration provision of ₹500 (PV of restoration). Offers to buy the mine for ₹800 (buyer assumes the restoration liability); negligible disposal costs. VIU of the mine ₹1,200 EXCLUDING restoration costs. Compute recoverable amount, carrying amount and impairment.
ARA ₹700; CA ₹1,000; impairment ₹300
BRA ₹1,200; CA ₹1,500 (incl provision); impairment ₹300
CRA ₹800; CA ₹1,000; impairment ₹200
DRA = max(₹800 FVLCTS, ₹700 VIU after restoration) = ₹800; CA of CGU (net of restoration provision) = ₹500; no impairment
Answer & Solution
Correct answer: D. RA = max(₹800 FVLCTS, ₹700 VIU after restoration) = ₹800; CA of CGU (net of restoration provision) = ₹500; no impairment
Buyer assumes restoration → FVLCTS ₹800 is net of restoration. To compare like-for-like, VIU must also be net of restoration: ₹1,200 − ₹500 = ₹700. CGU CA = mine ₹1,000 − provision ₹500 = ₹500. RA = max(₹800, ₹700) = ₹800 > CA ₹500 → no impairment.
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