Impairment of Fixed Assets

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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?

Credited to income immediately Signup and view all the answers

How should cashflow projections be based according to the text?

On reasonable and supportable assumptions Signup and view all the answers

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

Justifying the use of the budget data Signup and view all the answers

What is impairment of fixed assets?

A fall in market value of an asset Signup and view all the answers

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

Recoverable amount Signup and view all the answers

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

Negative changes in technology Signup and view all the answers

How is the recoverable amount of an asset calculated?

Fair value minus cost of disposal Signup and view all the answers

What does the fair value of an asset represent?

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

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

Incremental cost directly attributable to disposal of the asset Signup and view all the answers

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?

How should cash flow projections beyond 5 years be estimated?

When can an impairment loss for an asset in prior years be reversed?

What happens to any reversal of an impairment loss on a revalued asset?

How should cashflow projections be based according to the text?

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

What is impairment of fixed assets?

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

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

How is the recoverable amount of an asset calculated?

What does the fair value of an asset represent?

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

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