ABC Corporation holds a 25% stake in XYZ Inc., which it acquired several years ago. Over the past year, the economic climate has negatively impacted XYZ’s operations, resulting in significant losses. As of the latest reporting period, ABC Corporation needs to evaluate whether it should recognize any impairment on its investment in XYZ.
Under IFRS, ABC Corporation is required to assess whether there is any indication that an investment in an associate may be impaired. The recoverable amount of the investment is determined as the higher of fair value less costs to sell and value in use. Consider the following statements: