T8 Impairment of assets

Question 1

What is IAS 36?

Answer 1

IAS 36 Impairment of Assets

Question 2

What is impairment?

Answer 2

When the recoverable amount is lower than the carrying amount (NVB) so we have to lower the value the valeu of the asset in the account because it currently being overstated.

Question 3

What is the recoverbale amount?

Answer 3

The Higher out of:
The fair value of the asset less any cost to sell
OR
The value in use (The present value of teh future cashflows expected from the asset)

Question 4

How to calculate a discount factor?

Answer 4

1 Divided by 1.(Rate) to the power of (Number of years)

Question 5

What are the indicators of impairment?

Answer 5

External sources of information - Changes in the market or changes in interest rate.
Internal sources of information - Damages to the asset, The asset is underperforming over time.

Question 6

What is the double entry for an impairment?

Answer 6

DR Impairment expenses (On the P&L) and CR the asset.

Question 7

What is the double entry for an impairement that has been previously revalued up?