Question 1

Where an asset is measured using the cost model, any impairment loss is:

Accepted Answer

A)  accumulated in a separate 'accumulated impairment losses' account 
B)  set off against the balance of revenue 
C)  taken directly to equity 
D)  added to the balance of the accumulated depreciation account. 
A)  accumulated in a separate 'accumulated impairment losses' account 
B)  set off against the balance of revenue 
C)  taken directly to equity 
D)  added to the balance of the accumulated depreciation account. D

Question 2

If an entity does not expect to recover the carrying amount of an asset, the entity has incurred:

Accepted Answer

A)  an impairment loss 
B)  a depreciation expense 
C)  an amortisation cost 
D)  a loss on disposal 
A)  an impairment loss 
B)  a depreciation expense 
C)  an amortisation cost 
D)  a loss on disposal A

Question 3

When assessing the recoverable of assets that have previously been subject to an impairment loss, which of the following indicators assist in providing external evidence that an impairment loss has reversed:

Accepted Answer

A)  the asset's market value has decreased significantly during the period 
B)  significant changes with an adverse effect on the entity have taken place 
C)  market interest rates have decreased during the period 
D)  internal reporting sources indicate that the economic performance of the asset will not be as good as expected. 
A)  the asset's market value has decreased significantly during the period 
B)  significant changes with an adverse effect on the entity have taken place 
C)  market interest rates have decreased during the period 
D)  internal reporting sources indicate that the economic performance of the asset will not be as good as expected. C

Question 4

Jam Pty Ltd has two cash generating units. CGU A had a carrying amount of $700 and value in use of $750. CGU B has a carrying amount of $900 and a value in use of $800. The carrying amount of the head office assets is $400. CGU A & B utilise the head office services equally. The impairment loss for CGU A is:

Accepted Answer

A)  $0 
B)  $50 
C)  $150 
D)  $350 
A)  $0 
B)  $50 
C)  $150 
D)  $350

Question 5

When evaluating whether an asset has been impaired, the carrying amount of the asset must be compared to recoverable amount. Recoverable amount is the higher of:

Accepted Answer

A)  initial cost: and, fair value; 
B)  fair value less costs to sell: and, value in use; 
C)  original cost: and, net present value; 
D)  value in use: and, original cost. 
A)  initial cost: and, fair value; 
B)  fair value less costs to sell: and, value in use; 
C)  original cost: and, net present value; 
D)  value in use: and, original cost.

Question 6

Nguyen Limited estimated that it would receive future cash flows from the use of equipment:
End of Year 1 $10 000
End of Year 2 $50 000
End of Year 3 $20 000
The discount rate was determined as 8%. The 'value in use' of the equipment is:

Accepted Answer

A)  $80 000 
B)  $73 600 
C)  $68 000 
D)  $63 500. 
A)  $80 000 
B)  $73 600 
C)  $68 000 
D)  $63 500.

Question 7

An impairment loss occurs when:

Accepted Answer

A)  the recoverable amount of an asset exceeds the carrying amount 
B)  the carrying amount of an asset exceeds the recoverable amount 
C)  the asset has a zero residual value 
D)  the recoverable amount of an asset exceeds its initial cost. 
A)  the recoverable amount of an asset exceeds the carrying amount 
B)  the carrying amount of an asset exceeds the recoverable amount 
C)  the asset has a zero residual value 
D)  the recoverable amount of an asset exceeds its initial cost.

Question 8

When goodwill is acquired under a business combination it is subject to an impairment test every:

Accepted Answer

A)  year 
B)  two years 
C)  three years 
D)  five years. 
A)  year 
B)  two years 
C)  three years 
D)  five years.

Question 9

In relation to the impairment of assets, AASB 136 Impairment of Assets, requires the following disclosures for each class of assets:
I The line of the statement of profit or loss and other comprehensive income in which impairment losses are included.
II The amount of reversals of impairment losses during the period.
III The amount of impairment losses recognised directly in other comprehensive income.
IV The beginning and ending balances of any 'provision for impairment' account.

Accepted Answer

A)  I, II, III and IV 
B)  I, II and III only 
C)  II and IV only 
D)  IV only. 
A)  I, II, III and IV 
B)  I, II and III only 
C)  II and IV only 
D)  IV only.

Question 10

Which of the following assets need to be tested for impairment every year?
I intangible assets with indefinite useful lives
II intangible assets not yet available for use
III intangible assets accounted for under the revaluation method
IV goodwill acquired in a business combination

Accepted Answer

A)  I, II and III only 
B)  II, III and IV only 
C)  I, II and IV only 
D)  I, III and IV only 
A)  I, II and III only 
B)  II, III and IV only 
C)  I, II and IV only 
D)  I, III and IV only

Question 11

An appropriate journal entry to recognise an impairment loss under the cost model is:

Accepted Answer

A)  
DR $\quad$Accumulated impairment losses 
CR $\quad$Impairment loss 
B)  
DR $\quad$Accumulated impairment losses 
CR $\quad$Asset revaluation (Equity) 
C)  
DR$\quad$ Impairment loss
CR $\quad$Accumulated depreciation \& impairment losses 
D) 
DR$\quad$ Revenue 
CR $\quad$Impairment loss 
A)  
DR $\quad$Accumulated impairment losses 
CR $\quad$Impairment loss 
B)  
DR $\quad$Accumulated impairment losses 
CR $\quad$Asset revaluation (Equity) 
C)  
DR$\quad$ Impairment loss
CR $\quad$Accumulated depreciation \& impairment losses 
D) 
DR$\quad$ Revenue 
CR $\quad$Impairment loss

Question 12

Hayfield Limited recognised an impairment loss of $200 against a cash-generating unit containing the following assets: Buildings $500; Roads $300; Equipment $600. The net carrying amount of the Roads after allocation of the impairment loss is:

Accepted Answer

A)  $100 
B)  $235 
C)  $257. 
D)  $300 
A)  $100 
B)  $235 
C)  $257. 
D)  $300

Question 13

According to AASB 136 Impairment of Assets, the recoverable amount test requires an entity to compare the fair value an asset less costs to sell, with:

Accepted Answer

A)  the amount obtainable from the sale of the asset 
B)  the costs directly attributable to the liquidation of the asset 
C)  its disposal value 
D)  its value in use. 
A)  the amount obtainable from the sale of the asset 
B)  the costs directly attributable to the liquidation of the asset 
C)  its disposal value 
D)  its value in use.

Question 14

Under AASB 136 Impairment of Assets, impairment of an asset, and the accounting treatment using the cost model, are as follows:
$\quad$$\quad$Impairment$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$Accounting treatment
a. Carrying amount of an asset is less$\quad$$\quad$Asset is written up to its recoverable amount
than its recoverable amount
b. Carrying amount of an asset is less$\quad$$\quad$$\quad$$\quad$No change to the asset value
 than its recoverable amount
c. Carrying amount of an asset is  $\quad$$\quad$$\quad$$\quad$ Asset is written down to its recoverable amount
greater than its recoverable amount
d. Carrying amount of an asset is$\quad$$\quad$$\quad$$\quad$No change to the asset value
 greater than its recoverable amount

Accepted Answer

The answer of Under AASB 136 Impairment of Assets, impairment...

Question 15

Value in use is:

Accepted Answer

A)  amount obtainable from disposal of an asset excluding any selling costs 
B)  initial cost of an asset less any expected disposal costs 
C)  incremental costs directly attributable to disposal of an asset 
D)  the present value of future cash flows expected to be derived from an asset 
A)  amount obtainable from disposal of an asset excluding any selling costs 
B)  initial cost of an asset less any expected disposal costs 
C)  incremental costs directly attributable to disposal of an asset 
D)  the present value of future cash flows expected to be derived from an asset

Question 16

Which of the following is NOT correct in relation to the reversal of an impairment loss of an individual asset?

Accepted Answer

A)  When reversing an impairment loss the carrying amount cannot be increased to an amount in excess of the carrying amount that would have been determined had no impairment loss been recognised. 
B)  For a depreciable asset there needs to be a calculation of carrying amount using the depreciation variables applied before the impairment loss to determine what the carrying amount would have been if there had been no impairment loss. 
C)  If the individual asset is recorded under the cost model, then the increase in the carrying amount is recognised immediately in profit or loss: 
D)  Where the recoverable amount is less than the carrying amount of an individual asset, the reversal of a previous impairment loss requires adjusting the carrying amount of the asset to recoverable amount. 
A)  When reversing an impairment loss the carrying amount cannot be increased to an amount in excess of the carrying amount that would have been determined had no impairment loss been recognised. 
B)  For a depreciable asset there needs to be a calculation of carrying amount using the depreciation variables applied before the impairment loss to determine what the carrying amount would have been if there had been no impairment loss. 
C)  If the individual asset is recorded under the cost model, then the increase in the carrying amount is recognised immediately in profit or loss: 
D)  Where the recoverable amount is less than the carrying amount of an individual asset, the reversal of a previous impairment loss requires adjusting the carrying amount of the asset to recoverable amount.

Question 17

Constructor Limited estimated an impairment loss of $500 against its single cash- generating unit. The company had the following assets: Headquarters Building $1000; Construction Plant $600; Equipment $400. The net carrying amount of the Equipment after allocation of the impairment loss is:

Accepted Answer

A)  $200 
B)  $400 
C)  $300 
D)  $0 
A)  $200 
B)  $400 
C)  $300 
D)  $0

Question 18

When an asset is measured using the revaluation model, any impairment loss is treated as:

Accepted Answer

A)  a revaluation decrement 
B)  a revaluation increment 
C)  a set-off against depreciation expense 
D)  an addition to depreciation expense. 
A)  a revaluation decrement 
B)  a revaluation increment 
C)  a set-off against depreciation expense 
D)  an addition to depreciation expense.

Question 19

Candy Limited expected future cash flows from the use of Equipment as follows: End of Year 1 $4000; End of Year 2 $5000; End of Year 3 $2000. The discount rate was determined as 5%. The value in use of the equipment is:

Accepted Answer

A)  $10 073 
B)  $10 576 
C)  $11 000 
D)  $11 550. 
A)  $10 073 
B)  $10 576 
C)  $11 000 
D)  $11 550.

Question 20

Which of the following is required to be disclosed for each class of assets?
I the amount of impairment losses recognised in profit or loss during the period
II the amount of reversals of impairment losses recognised in profit or loss during the period
III the amount of impairment losses on revalued assets recognised directly in equity during the period; and
IV the amount of reversals of impairment losses on revalued assets recognised directly in other comprehensive income during the period.

Accepted Answer

A)  III and IV only 
B)  I, II, III and IV 
C)  I, II and III only 
D)  I and II only 
A)  III and IV only 
B)  I, II, III and IV 
C)  I, II and III only 
D)  I and II only

Exam 16: Impairment of Assets

Where an asset is measured using the cost model, any impairment loss is:

If an entity does not expect to recover the carrying amount of an asset, the entity has incurred:

When assessing the recoverable of assets that have previously been subject to an impairment loss, which of the following indicators assist in providing external evidence that an impairment loss has reversed:

When evaluating whether an asset has been impaired, the carrying amount of the asset must be compared to recoverable amount. Recoverable amount is the higher of:

Nguyen Limited estimated that it would receive future cash flows from the use of equipment: End of Year 1 $10 000 End of Year 2 $50 000 End of Year 3 $20 000 The discount rate was determined as 8%. The 'value in use' of the equipment is:

An impairment loss occurs when:

When goodwill is acquired under a business combination it is subject to an impairment test every:

Which of the following assets need to be tested for impairment every year? I intangible assets with indefinite useful lives II intangible assets not yet available for use III intangible assets accounted for under the revaluation method IV goodwill acquired in a business combination

An appropriate journal entry to recognise an impairment loss under the cost model is:

Hayfield Limited recognised an impairment loss of $200 against a cash-generating unit containing the following assets: Buildings $500; Roads $300; Equipment $600. The net carrying amount of the Roads after allocation of the impairment loss is:

According to AASB 136 Impairment of Assets, the recoverable amount test requires an entity to compare the fair value an asset less costs to sell, with:

Value in use is:

Which of the following is NOT correct in relation to the reversal of an impairment loss of an individual asset?

Constructor Limited estimated an impairment loss of $500 against its single cash- generating unit. The company had the following assets: Headquarters Building $1000; Construction Plant $600; Equipment $400. The net carrying amount of the Equipment after allocation of the impairment loss is:

When an asset is measured using the revaluation model, any impairment loss is treated as:

Candy Limited expected future cash flows from the use of Equipment as follows: End of Year 1 $4000; End of Year 2 $5000; End of Year 3 $2000. The discount rate was determined as 5%. The value in use of the equipment is:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Shareholders Equity: Share Capital and Reserves

Fair Value Measurement

Revenue

Provisions, Contingent Liabilities and Contingent Assets

Income Taxes

Financial Instruments

Share-Based Payments

Translation of the Financial Statements of Foreign Entities

Employee Benefits

Inventories

Property, Plant and Equipment

Leases

Understanding Australian Accounting Standards

Accounting for Mineral Resources

Agriculture

Financial Statement Presentation

Statement of Cash Flows

Earnings Per Share

Operating Segments

Operating Segments

Business Combinations

Consolidation: Principles and Accounting Requirements

Consolidation: Intragroup Transactions

Consolidation: Non Controlling Interest

Joint Arrangements

Associates and Joint Ventures

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