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Flashcards in 4 Impairment of assets Deck (7)
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1
Q

What is an impaired asset?

A

When the recoverable amount is below its carrying amount

2
Q

How do you calculate the recoverable amount?

A

The higher of:

  • Fair value less costs to sell
  • Value in use
3
Q

How to measure fair value less costs to sell?

A

A binding sale agreement or the current market price less costs of disposals (with an active market).

4
Q

How to measure value in use?

A

Estimating future cash inflows and outflows

5
Q

If an asset has been previously revalued, how is this treated?

A

Taken to the revaluation reserve first, and then to the profit and loss.

6
Q

What is the definition of a cash generating unit?

A

A cash generating unit is the smallest identifiable group of assets for which independent cashflows are identifiable

7
Q

What order should assets be impaired?

A

Goodwill and then remaining assets pro-rata based on their carrying amount