Lauren Ltd bought some land on 1 January 20X4 for GHS 500,000. On 31 December 20X5, this land was revalued to GHS 700,000. On 31 December 20X7, the fair value less costs to sell off this land was estimated at GHS 400,000 and its value in use at GHS 450,000. According to IAS 36 Impairment of Assets, what amount will be included in the income statement of Lauren Ltd for the year ended 31 December 20X7 in respect of the impairment loss on this land?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
According to IAS 36 Impairment of Assets, what amount will be included in the income statement of Lauren Ltd for the year ended 31 December 20X7 in respect of the impairment loss on this land?
Step by step
Solved in 4 steps
