Question 1

Gairdner Limited recognised an impairment loss of $50 000 against a cash-generating unit consisting of the following assets: buildings $500 000; roads $300 000; and equipment $600 000.The net carrying amount of the roads after allocation of the impairment loss is:

Accepted Answer

A) $310 714. 
B) $278 571. 
C) $289 286. 
D) $282 143.

Question 2

The impairment test for goodwill must be conducted:

Accepted Answer

A) annually or more frequently if there is an indication the cash-generating unit may be impaired. 
B) on 1 January each year. 
C) once every three years at balance date. 
D) only if it is reasonable to expect that goodwill has been impaired.

Question 3

Higher cash outflows and/or lower cash inflows expected from an asset are examples of internal sources of information that may indicate that an asset is impaired.

Accepted Answer

A) True 
 B)False

Question 4

Deferred tax assets are subject to annual impairment tests.

Accepted Answer

A) True 
 B)False

Question 5

When calculating value in use,cash flow projections should cover a maximum period of three years.

Accepted Answer

A) True 
 B)False

Question 6

At reporting date,the carrying amount of a cash-generating unit was considered to be have been impaired by $1000.The unit included the following assets: land $5000; plant $4000; and goodwill $1250.The carrying amount of goodwill after the allocation of the impairment loss is:

Accepted Answer

A) $0. 
B) $250. 
C) $3000. 
D) $4000.

Question 7

An impairment test is conducted only:

Accepted Answer

A) at each balance date. 
B) every three years. 
C) when there is evidence that assets have been impaired. 
D) at each reporting date including interim reporting dates such as half-year.

Question 8

Which of the following assets is incorrect?

Accepted Answer

A) Corporate assets should never be allocated to cash-generating units. 
B) There are restrictions on how far a particular asset can be written down in the allocation process. 
C) Where an impairment loss occurs in a cash-generating unit,and no goodwill exists,the impairment loss is allocated across the carrying amounts of the unit's assets. 
D) AASB 136 Impairment of Assets provides guidelines to help determine the cash-generating units in an entity.

Question 9

When assessing the value in use of equipment the following estimates of cash flows and risk rates were made.In one year: $1000 at 4%; in 2 years $1000 at 4.5%,and in 3 years $1000 at 5%.The expected present value of the asset is:

Accepted Answer

A) $3000. 
B) $2886. 
C) $2591. 
D) $2742.

Question 10

Which of the following is an internal source of information that may be used to indicate if an asset is impaired?

Accepted Answer

A) Economic performance of the asset 
B) Market capitalisation 
C) Interest rates 
D) Asset's value

Question 11

Holly Limited estimated that it would receive future cash flows from the use of its equipment as follows.
$\triangleright$End of year 1 $25 000.
$\triangleright$End of year 2 $40 000.
$\triangleright$End of year 3 $15 000.
The discount rate was determined as 5%.The 'value in use' of the equipment is:

Accepted Answer

A) $80 000. 
B) $76 190. 
C) $73 047. 
D) $63 500.

Question 12

When calculating value in use,cash inflows relating to financing activities and income tax must be excluded from the calculation.

Accepted Answer

A) True 
 B)False

Question 13

Under AASB 136 Impairment of Assets,which of the following assets are subject to impairment testing?

Accepted Answer

A) I 
B) II 
C) III 
D) IV

Question 14

A decrease in interest rates is an example of an external source of information that may indicate that an asset is impaired.

Accepted Answer

A) True 
 B)False

Question 15

AASB 136 Impairment of Assets prohibits the reversals of impairment losses relating to goodwill.

Accepted Answer

A) True 
 B)False

Question 16

Where the fair value less costs of disposal exceeds the carrying amount,it is necessary to calculate the value in use of the asset to determine whether it is impaired.

Accepted Answer

A) True 
 B)False

Question 17

Value in use is:

Accepted Answer

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

Question 18

Corporate assets are tested separately for impairment from other assets within an entity.

Accepted Answer

A) True 
 B)False

Question 19

If the recoverable amount of a cash-generating unit exceeds its carrying amount:

Accepted Answer

A) the carrying amount must be increased to the recoverable amount. 
B) there is no impairment loss. 
C) the carrying amount must be decreased to the fair value. 
D) there is an impairment loss.

Question 20

If some or all of the output of a group of assets is used internally,the assets may still constitute a cash generating unit.

Accepted Answer

A) True 
 B)False

Exam 13: Impairment of Assets

Gairdner Limited recognised an impairment loss of $50 000 against a cash-generating unit consisting of the following assets: buildings $500 000; roads $300 000; and equipment $600 000.The net carrying amount of the roads after allocation of the impairment loss is:

The impairment test for goodwill must be conducted:

Higher cash outflows and/or lower cash inflows expected from an asset are examples of internal sources of information that may indicate that an asset is impaired.

Deferred tax assets are subject to annual impairment tests.

When calculating value in use,cash flow projections should cover a maximum period of three years.

At reporting date,the carrying amount of a cash-generating unit was considered to be have been impaired by $1000.The unit included the following assets: land $5000; plant $4000; and goodwill $1250.The carrying amount of goodwill after the allocation of the impairment loss is:

An impairment test is conducted only:

Which of the following assets is incorrect?

When assessing the value in use of equipment the following estimates of cash flows and risk rates were made.In one year: $1000 at 4%; in 2 years $1000 at 4.5%,and in 3 years $1000 at 5%.The expected present value of the asset is:

Which of the following is an internal source of information that may be used to indicate if an asset is impaired?

When calculating value in use,cash inflows relating to financing activities and income tax must be excluded from the calculation.

Under AASB 136 Impairment of Assets,which of the following assets are subject to impairment testing?

A decrease in interest rates is an example of an external source of information that may indicate that an asset is impaired.

AASB 136 Impairment of Assets prohibits the reversals of impairment losses relating to goodwill.

Where the fair value less costs of disposal exceeds the carrying amount,it is necessary to calculate the value in use of the asset to determine whether it is impaired.

Value in use is:

Corporate assets are tested separately for impairment from other assets within an entity.

If the recoverable amount of a cash-generating unit exceeds its carrying amount:

If some or all of the output of a group of assets is used internally,the assets may still constitute a cash generating unit.