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Questions and Answers
What is the primary condition for an asset to be considered impaired?
What is the primary condition for an asset to be considered impaired?
Which method is NOT used to determine the recoverable amount of an asset?
Which method is NOT used to determine the recoverable amount of an asset?
What type of evidence can be utilized for identifying impairments?
What type of evidence can be utilized for identifying impairments?
In which financial statement is an impairment loss recognized?
In which financial statement is an impairment loss recognized?
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What happens to the depreciation of an asset after recognizing an impairment loss?
What happens to the depreciation of an asset after recognizing an impairment loss?
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Which of the following scenarios would lead to an impairment assessment?
Which of the following scenarios would lead to an impairment assessment?
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What is the outcome of an impairment loss if there was a previous revaluation surplus?
What is the outcome of an impairment loss if there was a previous revaluation surplus?
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What is a key condition for an asset to be classified as available for immediate sale?
What is a key condition for an asset to be classified as available for immediate sale?
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What value should a machine be recorded at if its fair value less costs to sell is lower than its carrying amount?
What value should a machine be recorded at if its fair value less costs to sell is lower than its carrying amount?
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If a non-current asset is bought for €130,000 and has a fair value less costs to sell of €52,000, what implications does this have?
If a non-current asset is bought for €130,000 and has a fair value less costs to sell of €52,000, what implications does this have?
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When classifying a discontinued operation, which of the following is NOT a criteria?
When classifying a discontinued operation, which of the following is NOT a criteria?
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How should impairments be recognized when an asset is classified as held for sale?
How should impairments be recognized when an asset is classified as held for sale?
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What is included in the financial statements about discontinued operations on the face of the Statement of Comprehensive Income?
What is included in the financial statements about discontinued operations on the face of the Statement of Comprehensive Income?
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In the classification of an asset as held for sale, which of the following is NOT a measurement rule?
In the classification of an asset as held for sale, which of the following is NOT a measurement rule?
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Which statement about management's role in the sale of an asset is true?
Which statement about management's role in the sale of an asset is true?
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What component must be analyzed in the notes to the financial statements regarding discontinued operations?
What component must be analyzed in the notes to the financial statements regarding discontinued operations?
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What is the total depreciation expense for the asset by the end of 2019?
What is the total depreciation expense for the asset by the end of 2019?
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What is the calculated value in use of the asset for the next three years discounted at 10%?
What is the calculated value in use of the asset for the next three years discounted at 10%?
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At the end of 2019, what is the fair value less costs to sell for the asset?
At the end of 2019, what is the fair value less costs to sell for the asset?
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Which financial statement reflects an impairment loss as an increase in profit (unless it was included in OCI)?
Which financial statement reflects an impairment loss as an increase in profit (unless it was included in OCI)?
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According to IFRS 5, when must a non-current asset be classified as held for sale?
According to IFRS 5, when must a non-current asset be classified as held for sale?
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What should be adjusted when there is a reversal of an impairment loss?
What should be adjusted when there is a reversal of an impairment loss?
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What is the maximum carrying value that an asset can reach after an impairment reversal?
What is the maximum carrying value that an asset can reach after an impairment reversal?
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What is the carrying amount of the asset before impairment as of 31/12/2019?
What is the carrying amount of the asset before impairment as of 31/12/2019?
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Study Notes
Non-Current Assets (Part II)
- Non-current assets are discussed, including impairment and those held for resale.
- Connolly Chapter 10 (IAS 36) covers impairment.
- Connolly Chapter 20 (IFRS 5) covers non-current assets held for resale and discontinued operations.
- IAS 36 covers impairment of assets excluding cash-generating units (CGUs).
IAS 36 Impairment of Assets (Excluding CGUs)
- Impairment is a sudden drop in a non-current asset's value beyond normal wear and tear/depreciation.
- Impairment occurs due to changes in the asset or its operating environment.
- An asset is impaired when its carrying amount exceeds its recoverable amount.
- Recoverable amount is the higher of value in use and fair value less costs to sell.
- Value in use considers future cash flows.
- Fair value considers market value or binding sale agreements.
Identifying Impairments
- Impaired assets require recognizing an impairment loss.
- This process involves identifying impaired assets, which uses external and internal sources of evidence.
- Relevant standards concerning impairment losses are mentioned (e.g., section 10.1, 10.2).
Recognition (P.289-290)
- Impairment losses are recognized in the statement of comprehensive income (as part of profit or loss) for the period.
- If a previous revaluation surplus exists, this impacts equity recognition.
- Depreciation is adjusted, often needing to revise the remaining useful life of the asset.
Impairment Examples
- Examples illustrate how to calculate impairment amounts impacting the statement of comprehensive income and financial position for 2019. Calculations use data like initial cost, depreciation schedule, and estimated future value and market values.
Reversal of Impairment Loss (P.303)
- Reversal should not increase an impaired asset's value beyond what it would have been had no impairment occurred.
- Any reversal is shown in the statement of comprehensive income (as an increase to profit) unless the initial impairment loss was already reflected in other comprehensive income (OCI).
- Depreciation charges adjust based on the new carrying value.
IFRS 5 - Non-Current Assets Held for Sale and Discontinued Operations
- IFRS 5 deals with non-current assets classified as held for sale, as well as discontinued operations.
- Non-current assets are categorized as 'held for sale' when they're more likely to be sold than used, with expected recovery through sale, rather than ongoing use.
- Conditions include immediate marketability, predicted sale within a year, and unlikely withdrawal from sale. Management commitment, active sale measures, and a high probability of sale are crucial.
Assets Held for Sale (P.500)
- Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell.
- Impairment losses are recognized in the statement of comprehensive income.
- Assets should be classified correctly to avoid issues concerning depreciation or amortization.
IFRS 5: Measurement Example
- A specific example details how to calculate the carrying amount of a machine and its impact on financial reporting on a specific date (December 31, 2019).
IFRS 5 – Discontinued Operations
- Discontinued Operations are components of an entity that are either disposed of or classified as held for sale.
- They could be a separate business line/geo area, or part of a planned disposal.
- Key characteristics include a separate major line of business, a geographically-distinct area, or a subsidiary used mainly for resale.
IFRS 5: Presentation and Disclosure
- Financial statements (FS) must show discontinued operations' after-tax profit/loss.
- Separate disclosure is required in notes to the financial statements, which analyze the component into revenue, expenses, costs, and tax.
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Description
Explore the concepts of non-current assets, impairment, and assets held for resale in this quiz. Focused on Connolly Chapters 10 and 20, it delves into IAS 36 and IFRS 5, outlining how to identify and assess impairment in assets. Test your understanding of these critical financial principles.
