Tangible Assets, Impairment

Question 1

Cost-model, FV Model and Revaluation Model

Answer 1

Cost-model = no revaluing at all, just depreciate
Revaluation model = allows for revaluation and depreciation at the new UEL and NBV. Revaluation will go against. Cannot be investment property
FV Model = no depreciation, use P&L for revaluation. Revalue once per year to FV

Question 2

Revaluation once asset becomes an Investment

Answer 2

Once asset becomes investment, the revaluation goes to the SoPL
Any losses also go to the P&L

Question 3

Investment property choice of Method

Answer 3

Can only be cost model or FV model
Investment properties ignore costs to sell

Question 4

Impairment rules

Answer 4

Impair if CV greater than NRV (FV less costs to sell or Value in use)

Question 5

Value in use also known as

Answer 5

PV of cashflows associated with it

Question 6

Annual impairment required

Answer 6

If intangible, annual impairment reviews happen

Question 7

Residual value and useful life review period

Answer 7

At least at year end

Question 8

Depreciation charge capitalisation

Answer 8

It can happen for held-for-use assets

Question 9

Indicators of Impairment

Answer 9

Internal: Evidence of obselence or damage
Changes in the way the asset is used
Economic performance of the asset worse than expected

External: Market value of the asset falls
Changes in the economy, technology or legal environment have affected the entity
Interest rates have increase, thus increasing the discount rate used in calculating the assets value in use.

Question 10

Impairment how to:

Answer 10

Impair only to FV
Higher of FV less cost to sell or VIU