Impairment of Assets

Question 1

Which statement best describes impairment loss?

a. The removal of an asset from the statement of financial position.
b. The amount by which the carrying amount of an asset exceeds recoverable amount.
c. The systematic allocation of depreciable amount over the useful life.
d. The amount by which the recoverable amount of an asset exceeds carrying amount.

Answer 1

b. The amount by which the carrying amount of an asset exceeds recoverable amount.

Question 2

What is the recoverable amount of an asset?

a. Fair value less cost of disposal
b. Value in use
c. Fair value less cost of disposal or value in use, whichever is higher
d. Fair value less cost of disposal or value in use, whichever is lower

Answer 2

c. Fair value less cost of disposal or value in use, whichever is higher

Question 3

What is the best evidence of fair value less cost of disposal?

a. An asset trading in an active market
b. The price in a binding sale agreement
c. Information about the disposal value of an asset
d. The carrying amount of the asset

Answer 3

Idk

Question 4

Which statement best describes value in use?

a. The present value of estimated future net cash flows expected to be derived from an asset
b. The amount of cash that could currently be obtained by selling an asset in an orderly disposal
c. The amount which an entity expects to obtain for an asset at the end of the useful life
d. Undiscounted future net cash flows

Answer 4

a. The present value of estimated future net cash flows expected to be derived from an asset

Question 5

Which is not relevant in determining value in use?

a. The expected future cash flows from the asset
b. The carrying amount of the asset
c. Expectation about possible variation in the amount and timing of future cash flows
d. The time value of money

Answer 5

b. The carrying amount of the asset

Question 6

If the fair value less cost of disposal cannot be determined
a. The asset is not impaired.
b. The recoverable amount is the value in use.
c. The net realizable value is used.
d. The carrying amount of the asset remains the same.

Answer 6

b. The recoverable amount is the value in use.

Question 7

If the assets are to be disposed of

a. The recoverable amount is the fair value less cost of disposal.
b. The recoverable amount is the value in use.
c. The asset is not impaired.
d. The recoverable amount is the carrying amount.

Answer 7

a. The recoverable amount is the fair value less cost of disposal.

Question 8

What is cash generating unit?

a. The smallest business segment
b. Any group of assets that generate cash flows
c. Any group of assets reported separately to management
d. The smallest group of assets that generate independent cash flows from continuing use

Answer 8

d. The smallest group of assets that generate independent cash flows from continuing use

Question 9

What is the allocation of an impairment loss recognized for a cash generating unit?

a. Across the assets of the unit based on carrying amount
b. Across the assets of the unit based on fair value
c. First, to any goodwill, and the balance to the other assets prorata. based on fair value
d. First, to any goodwill, and the balance to the other assets prorata based on carrying amount

Answer 9

d. First, to any goodwill, and the balance to the other assets prorata based on carrying amount

Question 10

Which condition must exist in order for an impairment loss to be recognized for an asset?

a. The carrying amount is less than fair value.
b. The carrying amount is not recoverable.
c. The carrying amount is less than value in use.
d. The carrying amount is recoverable.

Answer 10

b. The carrying amount is not recoverable.