Depreciation is based on the fair value of assets. An impairment loss occurs if the carrying value exceeds the recoverable amount, defined as the higher of the asset’s fair value (less costs to sell) and its value in use, which is the discounted net cash flows. For the purposes of determination which expenses may be capitalized, Research and Development expenditures are treated differently. Intangible assets are acquired at amortized cost.

Depreciation is based on the fair value of assets. An impairment loss occurs if the carrying value exceeds the recoverable amount, defined as the higher of the asset’s fair value (less costs to sell) and its value in use, which is the discounted net cash flows. For the purposes of determination which expenses may be capitalized, Research and Development expenditures are treated differently. Intangible assets are acquired at amortized cost.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA1: International Financial Reporting Standards

Section: Chapter Questions

Problem 9MCQ

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Which of the following is a CORRECT statement about long-term asset impairment? A. Under U.S. GAAP, an asset that has been written down because of impairment can be written back up if it increases in value in the future. B. An asset is impaired if the net book value is less than the expected future cash flows. C. If an asset is impaired, the expected future cash flows will exceed the fair value of the asset. D. If an asset is impaired, the impairment loss is the difference between the net book value and the fair value.
Which of the following is not a difference between U.S. GAAP and IFRS treatment of impaired assets? Multiple Choice The use of discounted cash flow. Due to differences, U.S. GAAP may trigger an impairment loss that would not be triggered by IFRS. The right to reverse prior impairment losses when there is a change in the estimates used to measure the loss. In determining the valuation, costs to sell are deducted from fair value.
Long-term operating assets can be reported on the balance sheet at fair value instead of historical cost. Does this statement apply to IFRS and U.S. GAAP? Group of answer choices It does not apply to IFRS and U.S. GAAP. It applies to U.S. GAAP only. It applies to IFRS only. It applies to both IFRS and U.S. GAAP.
Long-term operating assets can be reported on the balance sheet at fair value instead of historical cost. Does this statement apply to IFRS and U.S. GAAP? Group of answer choices It does not apply to IFRS and U.S. GAAP. It applies to U.S. GAAP only. It applies to both IFRS and U.S. GAAP. It applies to IFRS only.
The following terms are mismatched with its definitions. Match the terms to its correct definitions. Terms Definitions Carrying amount The higher of an asset's fair value less costs to sell and its value in use Cost The cost of an asset or other amount substituted for cost, less its residual value Depreciable amount The amount by which the carrying amount of an asset exceeds its recoverable amount Entity-specific value The amount at which an asset is recognised after deducting any accumulated depreciation and accumulated impairment losses Fair value The amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an asset at the time of its acquisition or construction Recoverable amount The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date Residual value The present value of the cash flows an entity expects to arise from the…
Consider the following statements:I. If the financial asset is reclassified from amortized cost to FVOCI, the financial asset is measured at fair value at the reclassification date and a new effective interest rate must be determined based on the new carrying amount or fair value at reclassification date.II. The difference between previous carrying amount and fair value of a financial asset when reclassified from amortized cost to FVPL is recognized in profit or loss.III. The cumulative gain or loss previously recognized in other comprehensive incomeis reclassified to profit or loss at reclassification date when the financial asset is reclassified from FVOCI to FVPL.IV. The original effective rate is not adjust for financial assets that are reclassified from FVPL to FVOCI.State whether the foregoing statements are incorrect.a. I and II are incorrectb. II and III are incorrectc. I and IV are incorrectd. All the statements are incorrect
One of the main differences between U.S. GAAP and IAS/IFRS is the measurement of property, plant & equipment subsequent to initial recognition. Read IAS 16 and answer the following questions. Provide a list of the references you have used to search this topic. How should any claim for compensation from third parties for impairment be accounted for? How should the recoverability of the carrying amount of property, plant & equipment be accounted for? How should any revaluation surplus from a revalued asset be treated if the revalued asset is disposed of?
Which of the following statements related to long-lived assets is true? Depreciation is calculated the same for financial reporting purposes and income tax purposes. If a company changes a depreciation estimate, it does not require a prior period adjustment. Depreciation is the process to value an asset at its fair market value. There is only one test to record an asset's impairment.
Which one of the following statements is not true regarding depreciation? a. It is a systematic, rational method of allocating the cost of an asset over its useful life b. It attempts to match the costs of acquiring an asset to the benefits to bederived from the asset c. It does not attempt to measure the value of the asset d. It provides funds for the replacement of the asset through tax savings over the asset's life
What is an impairment loss? A ) The amount by which the carrying amount of an asset exceeds the book value B ) The amount by which the carrying amount of an asset exceeds the recoverable amount C ) The difference between the fair value of an asset and the net realisable value of the asset D ) The amount by which the market value of an asset exceeds the net present value
According to IAS 16 Property, Plant and Equipment, which, if any, of the following statements about depreciation are correct? The main purpose of depreciation is to reflect the fall in value of an asset over its useful life When an asset is revalued, subsequent depreciation relating to the amount of the revaluation should be debited to the revaluation surplus rather than to the income statement The provision for depreciation ensures that there are funds available to replace an asset when this becomes necessary, though in times of inflation, additional amounts may need to be set aside A change in depreciation method constitutes a change in accounting policy and must be accounted for as such
According to IAS 16 Property, Plant and Equipment, which, if any, of the following statements about depreciation are correct? The main purpose of depreciation is to reflect the fall in value of an asset over its useful life When an asset is revalued, subsequent depreciation relating to the amount of the revaluation should be debited to the revaluation surplus rather than to the income statement The provision for depreciation ensures that there are funds available to replace an asset when this becomes necessary, though in times of inflation, additional amounts may need to be set aside A change in depreciation method constitutes a change in accounting policy and must be accounted for as such A (1) and (4) B (2) and (3) C (4) only D None of the statements is correct