IAS_36_Flashcards_Final

Question 1

What is impairment?

Answer 1

A drop in an asset’s value below what is recorded in the books.

Question 2

When is impairment loss recorded?

Answer 2

When an asset’s recoverable amount is lower than its book value.

Question 3

What is the recoverable amount?

Answer 3

The higher of fair value minus selling costs and value in use.

Question 4

What is fair value less costs to sell?

Answer 4

The amount the asset can be sold for minus selling costs.

Question 5

What is value in use?

Answer 5

The present value of future cash flows expected from the asset.

Question 6

When must an entity test for impairment?

Answer 6

If there is any sign that an asset may have lost value.

Question 7

Which assets are tested for impairment every year?

Answer 7

Goodwill and intangible assets with no set life.

Question 8

What are external signs of impairment?

Answer 8

Market value drop, negative changes in economy or tech.

Question 9

What are internal signs of impairment?

Answer 9

Damage, poor performance, or changes in asset use.

Question 10

What is a cash-generating unit (CGU)?

Answer 10

The smallest group of assets that brings in cash on its own.

Question 11

When is a CGU used?

Answer 11

When it is not possible to check a single asset for impairment.

Question 12

How is impairment loss spread in a CGU?

Answer 12

First to goodwill, then to other assets based on book value.

Question 13

What is the rule for reducing assets in a CGU?

Answer 13

Do not reduce any asset below its recoverable amount.

Question 14

Can impairment loss be reversed?

Answer 14

Yes, if the reason for the loss is no longer valid.

Question 15

Can goodwill impairment be reversed?

Answer 15

No, goodwill losses cannot be reversed.

Question 16

When can an impairment reversal be recorded?

Answer 16

When estimates used before have changed.

Question 17

What happens when impairment is reversed?

Answer 17

Increase the asset’s value but not above what it was before impairment

Question 18

What must be disclosed about impairment?

Answer 18

Losses, reversals, CGUs affected, and reasons.

Question 19

Where is impairment loss shown?

Answer 19

In the profit or loss section of the income statement.

Question 20

What if fair value cannot be found?

Answer 20

Use value in use only.

Question 21

How are future cash flows estimated?

Answer 21

Using reasonable and supportable assumptions.

Question 22

Should future cash flows include tax?

Answer 22

No, they should be pre-tax.

Question 23

Should cash flows include future restructures?

Answer 23

Only if the entity is committed to them.

Question 24

What is the discount rate in value in use?

Answer 24

A rate that reflects current market risks.

Question 25

Can corporate assets be impaired?

Answer 25

Yes, but usually through CGUs.

Question 26

What is an example of a corporate asset?

Answer 26

Head office or central IT system.

Question 27

How is goodwill impairment tested?

Answer 27

By comparing the CGU value including goodwill to its recoverable amount.

Question 28

What if goodwill cannot be allocated to CGUs?

Answer 28

Test the group of CGUs together.

Question 29

What if part of goodwill relates to a sold unit?

Answer 29

Allocate based on relative values.

Question 30

What if a CGU is disposed of?

Answer 30

Include any goodwill related to it in the disposal gain or loss.

Question 31

Can impairment be tested at interim dates?

Answer 31

Yes, if there are signs of loss.

Question 32

Are non-current assets held for sale tested under IAS 36?

Answer 32

No, they are covered under IFRS 5.

Question 33

What must companies disclose for goodwill?

Answer 33

Carrying amount and reasons for impairment or not.

Question 34

How often must estimates be reviewed?

Answer 34

At least once a year.

Question 35

Can an entity avoid impairment testing?

Answer 35

No, it is required by the standard.