Impairment Loss in Intermediate Accounting Exam Questions and Answers (100% Pass)
Impairment - Answers Is a fall in the market value of an asset so that recoverable amount is now less
than the carrying amount in the statement of financial position.
Standard Covering Impairment - Answers The standard and rules covering impairment of asset will
depend on what asset was impaired.
PAS 36 - Answers Impairment of Asset includes Property, plant, and equipment; Investment property
under cost model; Intangible assets; Investment in associates; Wasting asset (Exploration and
evaluation).
PAS 2 - Answers Inventories include Finished goods, Work-in-process, and Raw materials.
PFRS 9 - Answers Financial Instruments include Investment in debt securities and Loans and receivables.
Timing of Impairment Test - Answers At the end of each reporting period the company should determine
if any impairment indicator exists.
Impairment indicators (Internal) - Answers Evidence of obsolescence or physical damage of an asset;
Significant change in the manner or extent in which the asset is used with an adverse effect on the
entity; Evidence that economic performance of an asset will be worse than expected.
Impairment indicators (External) - Answers Significant decline in the asset's value more than what is
expected; Significant changes in technological, market, economic or legal environment in which the
entity operates; Increase in market interest rate or other market rates of return on investments;
Carrying amount of the net assets is more than its market capitalization.
Confirmation and Computation of Impairment - Answers Impairment exists when the recoverable
amount (RA) becomes lower than the recorded amount in the books also known as carrying amount
(CA).
Carrying Amount - Answers Cost less Accumulated depreciation.
Recoverable Amount - Answers Fair value less cost to sell versus Value-in-use, select higher.
Value-in-use - Answers Measured as the present value or discounted value of future net cash flows
expected to be derived from an asset.
Impairment Loss - Answers Carrying amount at impairment less Recoverable amount.
New Depreciation - Answers Impairment loss is considered as a change in estimate, thus, will result in a
change in depreciation expense.
Remaining Carrying Amount - Answers Cost less Accumulated depreciation less Impairment.
Impairment - Answers Is a fall in the market value of an asset so that recoverable amount is now less
than the carrying amount in the statement of financial position.
Standard Covering Impairment - Answers The standard and rules covering impairment of asset will
depend on what asset was impaired.
PAS 36 - Answers Impairment of Asset includes Property, plant, and equipment; Investment property
under cost model; Intangible assets; Investment in associates; Wasting asset (Exploration and
evaluation).
PAS 2 - Answers Inventories include Finished goods, Work-in-process, and Raw materials.
PFRS 9 - Answers Financial Instruments include Investment in debt securities and Loans and receivables.
Timing of Impairment Test - Answers At the end of each reporting period the company should determine
if any impairment indicator exists.
Impairment indicators (Internal) - Answers Evidence of obsolescence or physical damage of an asset;
Significant change in the manner or extent in which the asset is used with an adverse effect on the
entity; Evidence that economic performance of an asset will be worse than expected.
Impairment indicators (External) - Answers Significant decline in the asset's value more than what is
expected; Significant changes in technological, market, economic or legal environment in which the
entity operates; Increase in market interest rate or other market rates of return on investments;
Carrying amount of the net assets is more than its market capitalization.
Confirmation and Computation of Impairment - Answers Impairment exists when the recoverable
amount (RA) becomes lower than the recorded amount in the books also known as carrying amount
(CA).
Carrying Amount - Answers Cost less Accumulated depreciation.
Recoverable Amount - Answers Fair value less cost to sell versus Value-in-use, select higher.
Value-in-use - Answers Measured as the present value or discounted value of future net cash flows
expected to be derived from an asset.
Impairment Loss - Answers Carrying amount at impairment less Recoverable amount.
New Depreciation - Answers Impairment loss is considered as a change in estimate, thus, will result in a
change in depreciation expense.
Remaining Carrying Amount - Answers Cost less Accumulated depreciation less Impairment.
