Impairment of Fixed Assets - PPE
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Questions and Answers

What is the basis for measuring value in use according to the text?

  • Historical cost
  • Book value
  • Future net cash flows (correct)
  • Market value
  • How should cash flow projections beyond 5 years be estimated?

  • By ignoring projections beyond 5 years
  • By extrapolating the 5-year projections with a steady or declining growth rate (correct)
  • Using the initial budget
  • Based on the current market conditions
  • When can an impairment loss for an asset in prior years be reversed?

  • If there has been a change in the accounting method
  • If there has been a change in the market value
  • If there has been a change in the estimate of the recoverable amount (correct)
  • If there has been a change in the inflation rate
  • What happens to any reversal of an impairment loss on a revalued asset?

    <p>Credited to income immediately</p> Signup and view all the answers

    How should cashflow projections be based according to the text?

    <p>On reasonable and supportable assumptions</p> Signup and view all the answers

    What is required to estimate cash flow projections beyond 5 years?

    <p>Justifying the use of the budget data</p> Signup and view all the answers

    What is impairment of fixed assets?

    <p>A fall in market value of an asset</p> Signup and view all the answers

    According to the basic principle, an asset should not be carried above which amount?

    <p>Recoverable amount</p> Signup and view all the answers

    What are some external sources indicating possible impairment of fixed assets?

    <p>Negative changes in technology</p> Signup and view all the answers

    How is the recoverable amount of an asset calculated?

    <p>Fair value minus cost of disposal</p> Signup and view all the answers

    What does the fair value of an asset represent?

    <p>Price received from selling in an orderly transaction between market participants</p> Signup and view all the answers

    What does the Cost of Disposal refer to in relation to asset impairment?

    <p>Incremental cost directly attributable to disposal of the asset</p> Signup and view all the answers

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