FAR: IFRS-Intangible Assets: 4/10/2018 Flashcards
Under IFRS, the test for asset impairment is to compare the carrying value of the intangible asset to its recoverable amount. Which of the following is the recoverable amount according to IFRS?
1) The greater of future undiscounted cash flows or future discounted cash flows.
2) The greater of future discounted cash flows or fair value.
3) The greater of fair value less cost to sell or value in use.
4) The greater of fair value or value in use.
The greater of fair value less cost to sell or value in use.
Undiscounted cash flows are used in step one in US GAAP and future discounted cash flows are the value in use. Neither of these is the recoverable amount according to IFRS.
After an impairment loss is recognized, the adjusted carrying amount of the intangible asset shall be its new accounting basis. Under IFRS, which of the following statements about subsequent reversal of a previously recognized impairment loss is correct?
1) It is prohibited.
2) It is allowed when events and circumstances change.
3) It is allowed only if the intangible asset is recorded at fair value.
4) The recovery amount can exceed the carrying value at the time of the initial impairment.
It is allowed when events and circumstances change
Under IFRS impairment losses associated with identifiable intangibles are recoverable. Impairment losses associated with goodwill are NOT recoverable.
Under IFRS, which of the following is a criterion, other than goodwill, that must be met in order for an item to be recognized as an intangible asset?
1) The item’s fair value can be measured reliably.
2) The item is part of the entity’s activities aimed at gaining new scientific or technical knowledge.
3) The item is expected to be used in the production or supply of goods or services.
4) The item is identifiable and lacks physical substance.
The item is identifiable and lacks physical substance
Fair value measurement is not a criterion for recognizing an intangible asset separate from goodwill. IAS 38 defines an intangible asset as a nonmonetary asset without physical substance that is identifiable. Identifiable means that the asset is 1) separable or capable of being separated or divided from the entity and can be sold or transferred and 2) arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity. This definition is essentially the same as under U.S. GAAP.
