A company operates a mine in a country where legislation requires that the owner must restore the site on completion of its mining operations. The cost of restoration includes the replacement of the overburden, which must be removed before mining operations commence. A provision for the costs to replace the overburden was recognized as soon as the overburden was removed. The amount provided was recognized as part of the cost of the mine and is being depreciated over the mine's useful life. The carrying amount of the provision for restoration costs is P500,000, which is equal to the present value of the restoration costs. The entity is testing the mine for impairment. The cash-generating unit for the mine as a whole. The entity has received various offers to buy the mine at a price of around P800,000. The price reflects the fact that the buyer will assume the obligation to restore the overburden. Disposal costs for the mine are negligible. The value in use of the mine is approximately P1,200,000, excluding restoration costs. The carrying amount of the mine is P1,600,000. How much is the impairment loss? A. 700,000 C. 300,000 B. 200,000 D. 0
A company operates a mine in a country where legislation requires that the owner must restore the site on completion of its mining operations. The cost of restoration includes the replacement of the overburden, which must be removed before mining operations commence. A provision for the costs to replace the overburden was recognized as soon as the overburden was removed. The amount provided was recognized as part of the cost of the mine and is being depreciated over the mine's useful life. The carrying amount of the provision for restoration costs is P500,000, which is equal to the present value of the restoration costs. The entity is testing the mine for impairment. The cash-generating unit for the mine as a whole. The entity has received various offers to buy the mine at a price of around P800,000. The price reflects the fact that the buyer will assume the obligation to restore the overburden. Disposal costs for the mine are negligible. The value in use of the mine is approximately P1,200,000, excluding restoration costs. The carrying amount of the mine is P1,600,000.
How much is the impairment loss?
A. 700,000 C. 300,000
B. 200,000 D. 0
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