IAS 36: Impairment of Assets Quiz
8 Questions
8 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the primary focus of IAS 36?

  • Asset valuation
  • Impairment of assets (correct)
  • Cash flow statements
  • Financial statement presentation

What is the amount by which the carrying amount of an asset exceeds its recoverable amount?

  • Recoverable amount
  • Fair value
  • Carrying amount
  • Impairment loss (correct)

What is the carrying amount of an asset?

  • The amount at which an asset is recognized in the statement of financial position (correct)
  • The amount that can be obtained from the sale of an asset
  • The amount by which an asset's value exceeds its recoverable amount
  • The present value of the future cash flows

What is the recoverable amount of an asset?

<p>The higher of an asset's fair value less costs to sell and its value in use (C)</p> Signup and view all the answers

What is an indication of impairment?

<p>All of the above (D)</p> Signup and view all the answers

What is fair value less costs to sell?

<p>The amount that can be obtained from the sale of an asset in an arm's length transaction, minus the costs of selling (A)</p> Signup and view all the answers

What is the formula for calculating impairment loss?

<p>Impairment loss = Carrying amount - Recoverable amount (B)</p> Signup and view all the answers

What is a cash-generating unit (CGU)?

<p>The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets (D)</p> Signup and view all the answers

Flashcards

Impairment Loss

The amount by which the carrying amount of an asset exceeds its recoverable amount.

Carrying Amount

The amount at which an asset is recognized in the statement of financial position.

Recoverable Amount

The higher of an asset's fair value less costs to sell and its value in use.

Cash-Generating Unit (CGU)

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets.

Signup and view all the flashcards

Fair Value Less Costs to Sell

The amount that can be obtained from the sale of an asset in an arm's length transaction, minus the costs of selling.

Signup and view all the flashcards

Value in Use

The present value of the future cash flows expected to be derived from an asset.

Signup and view all the flashcards

Indications of Impairment

Indicates a potential impairment loss if the asset's value has fallen, or if there are signs of damage, obsolescence, etc.

Signup and view all the flashcards

Impairment Loss Recognition

Impairment loss is recognized in the income statement, unless it relates to a revalued asset.

Signup and view all the flashcards

Study Notes

Impairment of Assets

IAS 36 is an International Financial Reporting Standard (IFRS) that deals with the impairment of assets. The standard outlines the procedures for identifying and measuring impairment losses.

Key Concepts

  • Impairment loss: The amount by which the carrying amount of an asset exceeds its recoverable amount.
  • Carrying amount: The amount at which an asset is recognized in the statement of financial position.
  • Recoverable amount: The higher of an asset's fair value less costs to sell and its value in use.

Identifying Impairment

  • An entity should assess at each reporting date whether there is any indication of impairment.
  • If any indication exists, the entity should estimate the recoverable amount of the asset.
  • Indications of impairment may include:
    • External factors: market value declines, changes in market conditions, etc.
    • Internal factors: physical damage, obsolescence, etc.

Measuring Impairment

  • Fair value less costs to sell: The amount that can be obtained from the sale of an asset in an arm's length transaction, minus the costs of selling.
  • Value in use: The present value of the future cash flows expected to be derived from an asset.
  • The recoverable amount is the higher of fair value less costs to sell and value in use.

Impairment Loss Calculation

  • Impairment loss = Carrying amount - Recoverable amount
  • The impairment loss should be recognized in the income statement, unless it relates to a revalued asset.

Cash-Generating Units (CGUs)

  • A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets.
  • When impairment is identified, the entity should determine the recoverable amount of the CGU, rather than individual assets.

Disclosure Requirements

  • An entity should disclose the following:
    • The amount of impairment losses recognized in the income statement.
    • The amount of impairment losses reversed in the income statement.
    • The main classes of assets affected by impairment losses.

Impairment of Assets

  • IAS 36 deals with the impairment of assets, outlining procedures for identifying and measuring impairment losses.

Key Concepts

  • Impairment loss: the excess of an asset's carrying amount over its recoverable amount.
  • Carrying amount: the amount at which an asset is recognized in the statement of financial position.
  • Recoverable amount: the higher of an asset's fair value less costs to sell and its value in use.

Identifying Impairment

  • Assess for indications of impairment at each reporting date, considering:
    • External factors: market value declines, changes in market conditions, etc.
    • Internal factors: physical damage, obsolescence, etc.
  • If indications exist, estimate the asset's recoverable amount.

Measuring Impairment

  • Fair value less costs to sell: the amount obtained from an arm's length sale, minus selling costs.
  • Value in use: the present value of future cash flows expected from an asset.
  • Recoverable amount: the higher of fair value less costs to sell and value in use.

Impairment Loss Calculation

  • Impairment loss = Carrying amount - Recoverable amount
  • Recognize the impairment loss in the income statement, unless it relates to a revalued asset.

Cash-Generating Units (CGUs)

  • A CGU is the smallest group of assets with largely independent cash inflows.
  • When impairment is identified, determine the recoverable amount of the CGU, not individual assets.

Disclosure Requirements

  • Disclose:
    • Impairment losses recognized in the income statement.
    • Impairment losses reversed in the income statement.
    • Main classes of assets affected by impairment losses.

Studying That Suits You

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

Quiz Team

Description

Test your knowledge of IAS 36, the International Financial Reporting Standard that deals with identifying and measuring impairment losses of assets.

More Like This

Use Quizgecko on...
Browser
Browser