Ayariga Ltd acquired its head office on 1 January 2007 at a cost of TZS 10 million (excluding land). The company’s depreciation policy is to depreciate the property over 50 years on a straight-line basis. The estimated residual value is zero.
On 31 December 2011, Ayariga Ltd revalued the non-land element of its head office to TZS 16 million. In accordance with IAS 16 Property, Plant and Equipment the company has decided not to transfer annual amounts out of revaluation reserves as assets are used. In January 2017 storm damage occurred and the recoverable amount of the head office property (excluding land) was estimated at TZS 5.8 million.
In accordance with IAS 36 Impairment of Assets, recommend (with workings) how the above transaction should be accounted for as at 1 January 2017.