Question 1

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. D

Question 2

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. B

Question 3

According to IAS 36 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. D

Question 4

The impairment test must be applied to tangible assets:

Accepted Answer

A)  at each balance date; 
B)  every three years; 
C)  at each reporting date including interim reporting dates such as half-year; 
D)  only if there is an indication that the asset may be impaired. 
A)  at each balance date; 
B)  every three years; 
C)  at each reporting date including interim reporting dates such as half-year; 
D)  only if there is an indication that the asset may be impaired.

Question 5

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.

Question 6

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.

Question 7

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 8

The impairment test for goodwill must be conducted:

Accepted Answer

A)  annually, at balance date; 
B)  once every three years at balance date; 
C)  only if it is reasonable to expect that goodwill has been impaired; 
D)  annually, at the same time every year. 
A)  annually, at balance date; 
B)  once every three years at balance date; 
C)  only if it is reasonable to expect that goodwill has been impaired; 
D)  annually, at the same time every year.

Question 9

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.

Question 10

During 2016 Sacco Limited, estimated that the carrying amount of goodwill was impaired and wrote it down by €50 000. In 2017, the company reassessed goodwill was decided that the old acquired goodwill still existed. The appropriate accounting treatment in 2017 is:

Accepted Answer

A)  reverse the previous goodwill impairment loss; 
B)  recognise the revalued amount of goodwill by an adjustment against the asset revaluation surplus account; 
C)  ignore the reversal as it is prohibited by IAS 36 Impairment of Assets; 
D)  increase goodwill by an adjustment to retained earnings. 
A)  reverse the previous goodwill impairment loss; 
B)  recognise the revalued amount of goodwill by an adjustment against the asset revaluation surplus account; 
C)  ignore the reversal as it is prohibited by IAS 36 Impairment of Assets; 
D)  increase goodwill by an adjustment to retained earnings.

Question 11

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.

Question 12

At reporting date, the carrying amount of a cash-generating unit was considered to be have been impaired by $900. The unit included the following assets:
$\bullet$Land $4000;
$\bullet$Plant $3000;
$\bullet$Goodwill $500.
The amount of impairment allocated to land is:

Accepted Answer

A)  $200; 
B)  $229; 
C)  $300; 
D)  $514. 
A)  $200; 
B)  $229; 
C)  $300; 
D)  $514.

Question 13

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 14

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 15

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 and 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 and impairment losses 
D)  
DR $\quad$Revenue 
CR$\quad$ Impairment loss

Question 16

In allocating an impairment loss, an entity shall not reduce the carrying amount of an asset below the highest of:

Accepted Answer

A)  value in use and zero; 
B)  present value and value in use; 
C)  cost and market value; 
D)  initial cost and fair value. 
A)  value in use and zero; 
B)  present value and value in use; 
C)  cost and market value; 
D)  initial cost and fair value.

Question 17

Hayfield Limited recognised an impairment loss of $200 against a cash-generating unit containing the following assets: 
$\bullet$Buildings $500;
$\bullet$Roads $300;
$\bullet$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 18

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. CGUs A and 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 19

Nguyen Limited estimated that it would receive future cash flows from the use of equipment: 
$\bullet$End of Year 1 £10 000
$\bullet$End of Year 2 £50 000
$\bullet$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 20

At reporting date Guilder Limited estimated an impairment loss of €50 000 against its single cash-generating unit. The company had the following assets: 
$\bullet$Headquarters Building €100 000;
$\bullet$Plant €60 000;
$\bullet$Equipment €40 000.
The net carrying amount of Plant after allocation of the impairment loss is:

Accepted Answer

A)  €60 000; 
B)  €45 000; 
C)  €35 000; 
D)  €10 000. 
A)  €60 000; 
B)  €45 000; 
C)  €35 000; 
D)  €10 000.

Exam 11: Impairment of Assets

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

An impairment loss occurs when:

According to IAS 36 Impairment of Assets, the recoverable amount test requires an entity to compare the fair value an asset less costs to sell, with:

The impairment test must be applied to tangible assets:

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

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

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

The impairment test for goodwill must be conducted:

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:

During 2016 Sacco Limited, estimated that the carrying amount of goodwill was impaired and wrote it down by €50 000. In 2017, the company reassessed goodwill was decided that the old acquired goodwill still existed. The appropriate accounting treatment in 2017 is:

At reporting date, the carrying amount of a cash-generating unit was considered to be have been impaired by $900. The unit included the following assets: ∙\bullet∙ Land $4000; ∙\bullet∙ Plant $3000; ∙\bullet∙ Goodwill $500. The amount of impairment allocated to land is:

Value in use is:

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:

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

In allocating an impairment loss, an entity shall not reduce the carrying amount of an asset below the highest of:

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

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

The Iasb and Its Conceptual Framework

Owners Equity: Share Capital and Reserves

Fair Value Measurement

Revenue From Contracts With Customers

Provisions, Contingent Liabilities and Contingent Assets

Financial Instruments

Share-Based Payment

Inventories

Employee Benefits

Leases

Financial Statement Presentation

Statement of Cash Flows

Operating Segments

Other Key Notes Disclosures

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Translation of the Financial Statements of Foreign Entities

Agriculture

Associates and Joint Ventures

Joint Arrangements

Revenue From Contracts With Customers

Financial Instruments

Financial Instruments

Share-Based Payment

Exploration for and Evaluation of Mineral Resources

Filters

At reporting date, the carrying amount of a cash-generating unit was considered to be have been impaired by $900. The unit included the following assets: $\bullet$ Land $4000; $\bullet$ Plant $3000; $\bullet$ Goodwill $500. The amount of impairment allocated to land is:

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

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