IAS 36

Question 1

What are external sources impairment?

Answer 1

Decline in asset’s market value (property price fall)
Significant adverse change in technologica;, economic etc environment

Question 2

What are internal sources of impairment?

Answer 2

Obsolescence
Significant changes in period or expected in what asset is used
Evidence that asset’s performance is worse than expected
Operating losses
Loss of key employee

Question 3

What if carrying value > recoverable amount?

Answer 3

Asset is impaired and is written down to its recoverable amount

Question 4

What is recoverable amount?

Answer 4

Greater of:
Fair value - cost to sell (FVLCTS)

Value in use (VIU)

Question 5

What is recoverable amount?

Answer 5

Greater of FVLCTS and VIU

Question 6

FVLCTS?

Answer 6

Amount receivable from sale of asset - costs of disposal

Question 7

VIU?

Answer 7

PV of future cash flows from the asset

Question 8

Calculate VIU?

Answer 8

Net cash flows * (1/1+cost of capital)^number of years

Question 9

When must an entity use a CGU?

Answer 9

When it is not possible to estimate recoverable amount of an individual asset

Question 10

Assets within CGU?

Answer 10

Smallest group of assets that generates cash flows
Net of associated goodwill
Goodwill and corporate assets are allocated

Question 11

Allocation of impairment losses in CGU?

Answer 11

Firstly allocated to goodwill
Then other assets pro-rata

Question 12

What is impairment?

Answer 12

Assets shouldn’t be carried at more than their value to the entity

Question 13

What does minimum value represent?

Answer 13

No asset below:
Fair value less costs of disposal
VIU
Zero

Question 14

Goodwill in CGU?

Answer 14

Is always deducted completely

Question 15

What happens with expensed development?

Answer 15

Charged to SPL

Question 16

What happens with depreciation of capitalised amount?

Answer 16

Charged to SPL

Question 17

Calculate impairment loss charged to SPL?

Answer 17

Carrying amount - recoverable amount

Question 18

If NRV is greater than inventory?

Answer 18

Means inventory is not impaired

Question 19

Order of operations for CGU?

Answer 19

1. Adjustments
2. All of goodwill deducted
3. Othjer adjustments is done pro-rata

Question 20

Lichen Co expects machine to produce net cash flows of $30000 per annum for next three years. Cost of capital of Lichen Co is 8%

Calculate VIU?

Answer 20

30000 * 1/1.08^1 + 30000 * 1/1.08^2 + 30000 * 1/1.08^3

Question 21

Carrying amount after impairment calculation?

Answer 21

Carrying amount - impairment loss

Question 22

Reversal of impairment loss?

Answer 22

Carrying amonut if no impairment had occurred - carrying amount after impairment

Credit to SPL

Question 23

What is done when an asset is impaired?

Answer 23

It is written down to its recoverable debt