IAS 36 Impairment Quiz

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Questions and Answers

What does IAS 36 primarily deal with?

Recognition of Revenue
Impairment of Assets (correct)
Inventory Valuation
Financial Instruments

Which of the following is a key step in testing for impairment under IAS 36?

Comparing the asset's carrying amount to its recoverable amount (correct)
Estimating future market value of the asset
Assessing the original cost of the asset
Calculating the asset's depreciation over time

Under IAS 36, when should an entity perform an impairment test for an asset?

When the asset's book value exceeds its original cost
When there are indications of impairment (correct)
At the end of each financial year
When the asset's market value increases

Under IAS 40, investment property should be accounted for using which method?

Fair value model (B) Signup and view all the answers

Which of the following is a key criterion for classifying a property as investment property under IAS 40?

Property held for sale in the ordinary course of business (C) Signup and view all the answers

How should gains or losses from changes in fair value of investment property be recognized under IAS 40?

Recognized in profit or loss (A) Signup and view all the answers

Flashcards

IAS 36 focus

Deals with how to account for the impairment of assets, ensuring assets are not carried at more than their recoverable amount.

Impairment test key step

The core step is comparing the asset's carrying amount (book value) with its recoverable amount (higher of fair value less costs to sell and value in use).

When to test for impairment

An impairment test should be performed when there are indications that an asset's value may be impaired.

IAS 40 method

Under the fair value model, investment property is measured at its fair value at each reporting date.

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Investment property criteria

To classify as investment property under IAS 40, the property must be held to earn rentals or for capital appreciation, or both.

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Fair value gains/losses

Gains or losses from changes in the fair value of investment property are recognized in profit or loss in the period in which they arise.

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Study Notes

IAS 36: Impairment of Assets

IAS 36 primarily deals with the impairment of assets.
A key step in testing for impairment under IAS 36 involves comparing the asset's carrying amount with its recoverable amount.
An entity should perform an impairment test for an asset when there are indicators of impairment.

IAS 40: Investment Property

Under IAS 40, investment property should be accounted for using the fair value model, where the property's value is measured at fair value, with changes in fair value recognized in profit or loss.
A key criterion for classifying a property as investment property under IAS 40 is that it is held to earn rental income or for capital appreciation.
Gains or losses from changes in fair value of investment property should be recognized in profit or loss under IAS 40.