Impairment

Question 1

What are the different ways that Fair Value of an impaired asset determined?

Answer 1

quoted market prices in active markets for the impaired asset

market prices for similar assets

appropriate valuation techniques (e.g., present value of expected future cash flows)

Question 2

Where are impairment losses shown on the Income Statement?

Answer 2

Income before continuing operations BEFORE Income Taxes

Question 3

What Determines Impairment?

Answer 3

Estimated Future Cash Flows is less than the Carrying Value.

You then Subtract the Carrying value from the estimated fair value and that is your Impairment loss.

Question 4

what are changes in circumstances or events that may warrant an assessment for impairment?

Answer 4

significant decrease in the market value of the asset.

significant adverse change in the business climate that could affect the asset’s value.

an accumulation of costs significantly in excess of the amount originally expected to acquire or construct the asset.

Question 5

How does IFRS test for Impairment loss?

Answer 5

Excess of Carrying value over recoverable Amount.

Question 6

What is Recoverable amount under IFRS Terms?

Answer 6

Higher of Value in Use (PV of Future Discounted Cash Flows)

or Net Relizable Value (Sales Proceeds minus cost to sell)

Question 7

What must exist in order for an impairment loss to be recognized?

Answer 7

The carrying amount of the long-lived asset is not recoverable

Question 8

When does Impairment loss exist?

Answer 8

when the asset’s carrying amount exceeds its undiscounted future cash flows

Question 9

What does IFRS not use in it’s impairment consideration?

Answer 9

Undiscounted Cash Flows.

Question 10

Goodwill should be tested for value impairment at which of the following levels?

Answer 10

Each reporting unit

Question 11

FASB ASC 805-20-55-4 requires long-term customer-relationship intangible assets to be

Answer 11

subject to the same impairment loss recognition as other long-lived intangible assets that are held and used

Question 12

Under IFRS Impairment is measures at

Answer 12

Cash Generating Unit (CGU)

Subtract the Carrying Amount minus the CGU = Impairment

Question 13

Restorations of carrying value for long-lived assets are permitted if an asset’s fair value increases subsequent to recording an impairment loss when?

Answer 13

Held for Disposal

Question 14

Subsequent reversal of a previously recognized impairment loss of goodwill or other intangible assets

Answer 14

is prohibited in FASB ASC 350-30-35-14

Question 15

Even if the asset’s carrying amount (CA) exceeds its fair value (FV) - no impairment loss is to be recognized unless the

Answer 15

asset’s estimated future cash flows (ECF) are less than its carrying amount