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Are You an Impairment Testing Expert?

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Questions and Answers

What is the objective of lessors' disclosures?

To provide information for users to assess the effect of leases on the lessor's financial position, financial performance, and cash flows (correct)

To provide a detailed breakdown of the lease payments received by the lessor

To disclose the specific terms of each lease agreement

To provide information for users to assess the effect of leases on the lessee's financial position, financial performance, and cash flows

What are some external indications of asset impairment?

Changes in market interest rates (correct)

Plans to discontinue or restructure

Goodwill acquired in a business combination

Obsolescence

What is the objective of lessors' disclosures in financial statements?

To provide information about the lessor's financial position

To assess the effect of leases on the lessor's financial position, performance, and cash flows (correct)

To disclose information about the lessee's financial position

To provide information about the lessor's leasing activities

What must lessors disclose for finance leases?

Finance income and the net investment in lease Signup and view all the answers

When must intangible assets with indefinite useful lives be tested for impairment?

Annually Signup and view all the answers

What is the disclosure requirement for finance leases?

Disclose finance income and the net investment in the lease Signup and view all the answers

How can Covid-19 impact indications of impairment?

It can cause significant declines in asset value Signup and view all the answers

Which disclosure requirement should be applied for operating leases?

Apply the disclosure requirements of NZ IAS 16 for PPE being leased Signup and view all the answers

What disclosure requirements must lessors follow for operating leases?

Apply the disclosure requirements of NZ IAS 16 for PPE being leased Signup and view all the answers

Study Notes

Entities must assess whether there are indications of asset impairment at each reporting date.
The entity must estimate the recoverable amount (RA) of the asset if there is an indication of impairment.
Testing for impairment can be time-consuming.
Intangible assets with indefinite useful lives must be tested for impairment annually.
Goodwill acquired in a business combination must be tested for impairment annually.
External indications of impairment include significant declines in asset value, adverse changes in the technological, market, economic, or legal environment, and changes in market interest rates.
Internal indications of impairment include obsolescence, physical damage, idle assets, plans to discontinue or restructure, and worse than expected economic performance.
Covid-19 may impact the indications of impairment.
Testing for impairment requires consideration of multiple factors.
Impairment testing is important for accurate financial reporting.

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Description

Are you familiar with the process of asset impairment testing? This quiz will test your knowledge on the key concepts related to impairment testing, including indications of impairment, annual testing requirements, external and internal factors, and the potential impact of Covid-19. Test your understanding and learn more about why impairment testing is crucial for accurate financial reporting.