3 Questions
Which of the following statements is true regarding impairment loss allocation?
Impairment loss is allocated to reduce the carrying amount of both assets and goodwill.
What happens if the recoverable amount exceeds the carrying amount of a cash-generating unit with allocated goodwill?
The unit and goodwill are not impaired
Which of the following is true regarding the reversal of impairment loss for revalued assets?
Reversal of impairment loss is prohibited
Study Notes
- Goodwill must be tested for impairment annually.
- Allocation of goodwill to each cash-generating unit is required.
- Cash-generating units with allocated goodwill must be tested for impairment annually.
- If recoverable amount exceeds carrying amount, unit and goodwill are not impaired.
- Impairment loss is allocated to reduce carrying amount of assets.
- Carrying amount of an asset should not be reduced below fair value less costs of disposal, value in use, or zero.
- Reversal of an impairment loss is possible if recoverable amount increases.
- Reversal of an impairment loss is recognized in profit or loss, except for revalued assets.
- Depreciation must be adjusted for future periods after reversal of impairment loss.
- Reversal of impairment loss for goodwill is prohibited.
Test your knowledge on goodwill impairment with this informative quiz! From annual testing to allocation and reversal of impairment loss, this quiz covers all the essential concepts related to goodwill impairment. Sharpen your skills and learn about the intricacies of impairment testing and the impact it has on asset valuation. Keywords: goodwill impairment, impairment testing, allocation, recovery, depreciation, fair value.
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