4 Impairment of assets Flashcards
What is an impaired asset?
When the recoverable amount is below its carrying amount
How do you calculate the recoverable amount?
The higher of:
- Fair value less costs to sell
- Value in use
How to measure fair value less costs to sell?
A binding sale agreement or the current market price less costs of disposals (with an active market).
How to measure value in use?
Estimating future cash inflows and outflows
If an asset has been previously revalued, how is this treated?
Taken to the revaluation reserve first, and then to the profit and loss.
What is the definition of a cash generating unit?
A cash generating unit is the smallest identifiable group of assets for which independent cashflows are identifiable
What order should assets be impaired?
Goodwill and then remaining assets pro-rata based on their carrying amount
