On 31 December 20X1, U purchased 100% of the equity share capital of V, and V became a subsidiary of U on that date. U paid $110 million for the shares, and the fair value of the net assets of V at 31...

On 31 December 20X1, U purchased 100% of the equity share capital of V, and V became a subsidiary of U on that date. U paid $110 million for the shares, and the fair value of the net assets of V at 31 December 20X1 was $100 million. Goodwill on consolidation is written off over 10 years, starting in 20X2. At 31 December 20X2, the balance sheet of V showed the following balances: $ million Property, plant and equipment: Land and buildings………………………….50 Plant and machinery…………………………30 Net current assets……………………………15 95 On 31 December 20X2, the directors of U carried out an impairment review in which V was treated as a single cash-generating unit. The recoverable amount of the cash-generating unit at 31 December 20X2 was computed as $96 million. No assets within the cash-generating unit had suffered obvious impairment. What is the reduction in the consolidated reserves of U as a result of the impairment review of V (not including the normal annual write-off of goodwill)? A…………….…………….$1 million B…………………………..$5 million C…………………………..$8 million D…………………………..$9 million View Solution:

On 31 December 20X1 U purchased 100 of the equity