Impairment of Investment in ABC Corporation

Easy Intercorporate Investments Impairment Of Investments

XYZ Limited has invested in ABC Corporation, which is classified as an associate. At the end of the financial year, XYZ Limited performs an impairment review of its investment in ABC Corporation. The carrying amount of the investment is $1,200,000, while the recoverable amount based on fair value less costs to sell is determined to be $1,000,000.

Given this information, what should XYZ Limited report regarding the impairment of its investment in ABC Corporation?

XYZ Limited should recognize an impairment loss of $200,000.

XYZ Limited should recognize an impairment loss of $1,200,000.

XYZ Limited should not recognize any impairment loss.

Hint

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