Asset Impairment Quiz

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is defined as the amount an asset could be sold for, less direct selling costs?

Recoverable amount

Value in use

Fair value less costs to sell (correct)

Carrying amount

An impairment review is required every year for all tangible assets.

False

What should be disclosed in the notes to the Profit and Loss statement if an asset is impaired?

Impairment losses

The __________ is the higher of fair value less costs to sell or value in use.

recoverable amount Signup and view all the answers

Which of the following is NOT an indicator of impairment?

Increase in asset usage Signup and view all the answers

Match the following terms with their definitions:

Impairment = A reduction in recoverable amount below carrying amount Recoverable amount = Higher of fair value less costs to sell or value in use Carrying amount = Value at which an asset is recognized on the balance sheet Value in use = Present value of future cash flows from an asset Signup and view all the answers

If the recoverable amount of an asset is less than its carrying value, an impairment loss must be recognized.

True Signup and view all the answers

What action should be taken if an impairment loss is recognized on a revalued asset?

Written off against revaluation reserve Signup and view all the answers

An impairment review is only needed when there is an indication of possible __________.

impairment Signup and view all the answers

Which of the following is an example of an indicator of impairment?

Significant decline in asset value Signup and view all the answers

What is the recoverable amount for Asset B?

175 Signup and view all the answers

An asset is deemed impaired when its carrying value is less than its recoverable amount.

False Signup and view all the answers

What two calculations are used to determine recoverable amount?

Fair value less costs to sell and value in use. Signup and view all the answers

An impairment loss is recorded as a debit to _____ and a credit to the asset account.

Profit or loss Signup and view all the answers

The recoverable amount is lower than both the net selling price and the value in use of an asset.

False Signup and view all the answers

List the three types of assets that require an impairment review.

Intangibles with indefinite lives, goodwill, and assets with indicators of impairment. Signup and view all the answers

What is the primary factor that determines the amortisation of intangible assets?

Their useful economic life Signup and view all the answers

Intangible assets with an indefinite life require annual impairment reviews.

True Signup and view all the answers

What is the purpose of conducting an impairment review?

To determine if the carrying amount of an asset exceeds its recoverable amount. Signup and view all the answers

Intangible assets that have an indefinite life are subject to an annual ______ review.

impairment Signup and view all the answers

Match each indicator of impairment with its correct description:

Significant decline in market value = Indicates possible impairment due to external factors Negative changes in technology = Can lead to obsolescence of an asset Increased competition = May reduce the value of an asset Adverse economic conditions = Can affect the recoverable amount of an asset Signup and view all the answers

Study Notes

Financial Statement Focus Notes

This study guide covers financial statements for AAT Level 4.
It provides focus notes for various topics including regulatory frameworks, the conceptual framework, property, plant and equipment, intangible assets, impairments, inventories, taxation, leases, provisions and events after the reporting period, company finance, company financial statements, statement of cash flows, interpreting financial statements, and consolidated accounts: associates.
The document is authored by Kaplan Publishing.
The document is intended to support AAT Level 4 studies.

AAT Focus Notes Content Outline

Includes a table of contents with chapter titles and page numbers, helping students to quickly navigate through different topics
Each chapter details learning objectives for the students
Each chapter provides content about the topic including definition, accounting requirements, disclosures, illustrations with problem scenarios and solutions, summaries, further reading, and possible questions for review.
Provides additional tutor resources and guidance to enhance the learning experience.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge on asset impairment and recovery. This quiz covers concepts such as fair value, impairment reviews, and recoverable amounts. Understand the indicators of impairment and the necessary disclosures for financial reporting.