Impairments Flashcards
(7 cards)
1
Q
What is impairment
A
The amount which the carrying amount of an asset exceeds the recoverable amount
2
Q
Assets are shown at the lower of what
A
- Carrying value
- Recoverable amount
3
Q
Recoverable amount is shown at the higher of what
A
- Net Proceeds (fair value less cost to sell)
- Value in use (present value of future cash flow)
4
Q
What are the external factors that indicate impairment
A
- Assets market value has significantly declined
- Adverse changes in technological, market, economic or legal environment
- Interest rate charges decreasing the discount rate
- Carrying amount of net assets is more than market capitalization
5
Q
Internal evidence of impairment
A
- Obsolescence or physical damage of an asset
- Asset is becoming idle
- Plans to discontinue or restructure the operation to which the assets belong
- Plans to dispose of the asst sooner than expected
6
Q
What is the double entry of impairment if asset is held at historical cost
A
Dr P/L
Cr Non current assets
7
Q
What is the double entry of impairment if asset is held at revalued amount
A
Dr Revaluation surplus
Dr P/L
Cr Non current assets
