Document ID: chunk:federal_register_of_legislation:F2023C00180:front:0:p55
Version: federal_register_of_legislation:F2023C00180
Segment Type: other
Provision Reference: 
Character Range: 155496–161858

Carrying amount: depreciated historical cost (Schedule 5)                                                                                                                                                                     2,400(a)
  (a) The reversal does not result in the carrying amount of the plant exceeding what its carrying amount would have been at depreciated historical cost. Therefore, the full reversal of the impairment loss is recognised.

At the end of 20X3
IE53 There is a cash outflow of CU100 when the restructuring costs are paid. Even though a cash outflow has taken place, there is no change in the estimated future cash flows used to determine value in use at the end of 20X2. Therefore, the plant's recoverable amount is not calculated at the end of 20X3.

Schedule 5. Summary of the carrying amount of the plant

End of year                                                                                           Depreciated historical cost  Recoverable amount  Adjusted depreciation charge  Impairment loss  Carrying amount after impairment

                                                                                                      CU                                               CU                                             CU                                   CU        CU

20X0                                                                                                  3,000                                            2,051                                          0                                    (949)     2,051
20X1                                                                                                  2,700                                            nc                                             (205)                                0         1,846
20X2                                                                                                  2,400                                            2,162                                          (205)                                521       2,162
20X3                                                                                                  2,100                                            nc                                             (270)                                0         1,892
nc = not calculated as there is no indication that the impairment loss may have increased/decreased.

Example 6 Treatment of future costs
In this example, tax effects are ignored.

Background
IE54 At the end of 20X0, entity F tests a machine for impairment. The machine is a cash-generating unit. It is carried at depreciated historical cost and its carrying amount is CU150,000. It has an estimated remaining useful life of 10 years.
IE55 The machine's recoverable amount (ie higher of value in use and fair value less costs of disposal) is determined on the basis of a value in use calculation. Value in use is calculated using a pre-tax discount rate of 14 per cent.
IE56 Management approved budgets reflect:
(a) estimated costs necessary to maintain the level of economic benefit expected to arise from the machine in its current condition; and
(b) that in 20X4, costs of CU25,000 will be incurred to enhance the machine's performance by increasing its productive capacity.
IE57 At the end of 20X4, costs to enhance the machine's performance are incurred. The machine's estimated future cash flows reflected in the most recent management approved budgets are given in paragraph IE60 and a current discount rate is the same as at the end of 20X0.

At the end of 20X0
 Schedule 1. Calculation of the machine's value in use at the end of 20X0

Year                                                                                                                                                   Future         Discounted
                                                                                                                                                        cash flows    at 14%

                                                                                                                                                       CU                         CU

20X1                                                                                                                                                   22,165(a)                  19,443
20X2                                                                                                                                                   21,450(a)                  16,505
20X3                                                                                                                                                   20,550(a)                  13,871
20X4                                                                                                                                                   24,725(a),(b)              14,639
20X5                                                                                                                                                   25,325(a),(c)              13,153
20X6                                                                                                                                                   24,825(a),(c)              11,310
20X7                                                                                                                                                   24,123(a),(c)              9,640
20X8                                                                                                                                                   25,533(a),(c)              8,951
20X9                                                                                                                                                   24,234(a),(c)              7,452
20X10                                                                                                                                                  22,850(a),(c)              6,164
Value in use                                                                                                                                                                      121,128

   (a)      Includes estimated costs necessary to maintain the level of economic benefit expected to arise from the machine in