Impairment Of Assets

Question 1

IAS 36; impaired when carrying amt is more than recoverable amount

Answer 1

Step 1: CGU
eg. a vending machine would be an individual asset that generates cash, whereas an aircraft is a collection of assets that, when assembled, generates cash. If you separate a seat from the aircraft, the seat alone would not generate cash.

Step 2: when to test for impairment
- is there any internal or external proof or indication of impairment (state both in
Annual tests done for intangible assets

Step 3: measure the recoverable amt
higher of:
FV less disposal costs
Value in use(est. future CFs from use + disposal) and disc rate
Step 4: test for impairment or rec. loss
Recoverable-carrying (nbv)
= impairment loss = put in net income and asset CR, dep adj. for future
if CGU, first goodwill=nil, then rest to other items in cgu

Dr. Impairment loss
Cr. Equipment, net

Question 2

Reversal of impairment

Answer 2

ASPE = no reversal

Items other than goodwill
Should be written up to lower of new recoverable amount or NBV if it had not been impaired at time of new rec. amt

Dr. Equipment, net
Cr. Recovery of impairment loss

Question 3

ASPE 3063

Answer 3

Step 1:
Identify asset group
2: an event is the trigger to see if you should look into impairment

3. recoverable amt
   compare carrying amt to undiscounted future CFs (rec amount), if greater = impairment loss = FV - carrying amt
   write down to lower of 2.

aka undiscounted CFs
4. write down to FV (discounted)
CAN NOT BE REVERSED