Question 1

The recoverable amount of an asset is defined as the lower of the fair value less costs of disposal and value in use.

Accepted Answer

A) True 
 B)False  False

Question 2

Kerri Limited recognised an impairment loss on an item of plant asset on the 30th June.The recoverable amount of the asset after the loss is $900 and the asset has an estimated useful life of 4 years.Accumulated depreciation was $250 at that date and the straight line depreciation method is used.The original cost of the asset was $2500.The future annual depreciation amount is:

Accepted Answer

A) $625. 
B) $225. 
C) $163. 
D) $400. 
A) $625. 
B) $225. 
C) $163. 
D) $400. B

Question 3

According to AASB 136 Impairment of Assets,the recoverable amount of an asset or cash-generating asset is the:

Accepted Answer

A) lower of its fair value less costs of disposal and its value in use. 
B) higher of its fair value less costs of disposal and its value in exchange. 
C) lower of its fair value less costs of disposal and its value in exchange. 
D) higher of its fair value less costs of disposal and its value in use. 
A) lower of its fair value less costs of disposal and its value in use. 
B) higher of its fair value less costs of disposal and its value in exchange. 
C) lower of its fair value less costs of disposal and its value in exchange. 
D) higher of its fair value less costs of disposal and its value in use. D

Question 4

Where an asset is measured using the cost model,any impairment loss is recognised immediately in profit and loss.

Accepted Answer

A) True 
 B)False

Question 5

The impairment test involves comparing the asset's:

Accepted Answer

A) carrying amount with its fair value. 
B) carrying amount with its recoverable amount. 
C) fair value with its residual value. 
D) fair value with its replacement cost. 
A) carrying amount with its fair value. 
B) carrying amount with its recoverable amount. 
C) fair value with its residual value. 
D) fair value with its replacement cost.

Question 6

Intangible assets that are not yet available for use are not required to be tested for impairment.

Accepted Answer

A) True 
 B)False

Question 7

According to AASB 136 Impairment of Assets,which of the following indicators assist in providing external evidence that an impairment loss has reversed?

Accepted Answer

A) Market interest rates have increased during the period. 
B) Significant changes with an adverse effect on the entity have taken place. 
C) Market interest rates have decreased during the period. 
D) Internal reporting sources indicate that the economic performance of the asset will not be as good as expected. 
A) Market interest rates have increased during the period. 
B) Significant changes with an adverse effect on the entity have taken place. 
C) Market interest rates have decreased during the period. 
D) Internal reporting sources indicate that the economic performance of the asset will not be as good as expected.

Question 8

A cash generating unit is defined in AASB 136 Impairment of Assets as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Accepted Answer

A) True 
 B)False

Question 9

Cash-generating units should be identified consistently from period to period for the same group of assets.

Accepted Answer

A) True 
 B)False

Question 10

In allocating an impairment loss,an entity shall not reduce the carrying amount of an asset below the highest of:

Accepted Answer

A) value in use and zero. 
B) present value and zero. 
C) cost and market value. 
D) initial cost and replacement cost. 
A) value in use and zero. 
B) present value and zero. 
C) cost and market value. 
D) initial cost and replacement cost.

Question 11

When a cash generating unit containing goodwill is impaired,the impairment loss is allocated on a pro-rata basis across all of the assets in the cash generating unit.

Accepted Answer

A) True 
 B)False

Question 12

In relation to the impairment of assets,AASB 136 Impairment of Assets requires which of the following disclosures for each class of assets?
I The line item(s)of the income statement in which impairment losses are included.
II The amount of reversals of impairment losses on revalued assets.
III The amount of impairment losses recognised in profit or loss.
IV The amount of impairment losses on revalued assets.

Accepted Answer

A) I,II,III and IV 
B) I,II and III only 
C) II and IV only 
D) IV only 
A) I,II,III and IV 
B) I,II and III only 
C) II and IV only 
D) IV only

Question 13

Under AASB 136 Impairment of Assets,impairment of an asset and the accounting treatment using the cost model are which of the following?

Accepted Answer

The answer of Under AASB 136 Impairment of Assets,impairment of...

Question 14

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets is referred to as a/an:

Accepted Answer

A) small-group unit. 
B) cash-generating unit. 
C) identifiable unit. 
D) independent unit. 
A) small-group unit. 
B) cash-generating unit. 
C) identifiable unit. 
D) independent unit.

Question 15

Where the carrying amount of an asset exceeds the fair value less costs of disposal,it is necessary to calculate the value in use of the asset to determine whether it is impaired.

Accepted Answer

A) True 
 B)False

Question 16

Any costs arising after the sale of an asset are included in the disposal costs of that asset.

Accepted Answer

A) True 
 B)False

Question 17

The amount by which the carrying amount of an asset or a cash-generating unit exceeds its carrying amount is referred to as a/an:

Accepted Answer

A) depreciation expense. 
B) amortisation cost. 
C) impairment loss. 
D) loss on disposal. 
A) depreciation expense. 
B) amortisation cost. 
C) impairment loss. 
D) loss on disposal.

Question 18

Which of the following is not one of the guidelines in AASB 136 Impairment of Assets for identifying a cash-generating unit?

Accepted Answer

A) Consider how management makes decisions about continuing or disposing of the entity's assets and operations. 
B) If the output of the group of assets can be sold internally,then these process can be used to measure the value in use of the group of assets. 
C) If there is no active market for the output of the group of assets,the group constitutes a cash-generating unit. 
D) Consider how management monitors the entity's operations,such as by product lines,business,individual locations,districts or regional areas. 
A) Consider how management makes decisions about continuing or disposing of the entity's assets and operations. 
B) If the output of the group of assets can be sold internally,then these process can be used to measure the value in use of the group of assets. 
C) If there is no active market for the output of the group of assets,the group constitutes a cash-generating unit. 
D) Consider how management monitors the entity's operations,such as by product lines,business,individual locations,districts or regional areas.

Question 19

When an asset is measured at fair value,the appropriate journal entry to record an impairment loss will include which of the following entries?

Accepted Answer

A) DR Asset 
B) DR Loss-downward revaluation of asset 
C) DR Revaluation increment 
D) DR Depreciation expense 
A) DR Asset 
B) DR Loss-downward revaluation of asset 
C) DR Revaluation increment 
D) DR Depreciation expense

Question 20

AASB 136 Impairment of Assets requires disclosures about estimates and judgements made in the impairment testing process.

Accepted Answer

A) True 
 B)False

Exam 13: Impairment of Assets

The recoverable amount of an asset is defined as the lower of the fair value less costs of disposal and value in use.

According to AASB 136 Impairment of Assets,the recoverable amount of an asset or cash-generating asset is the:

Where an asset is measured using the cost model,any impairment loss is recognised immediately in profit and loss.

The impairment test involves comparing the asset's:

Intangible assets that are not yet available for use are not required to be tested for impairment.

According to AASB 136 Impairment of Assets,which of the following indicators assist in providing external evidence that an impairment loss has reversed?

A cash generating unit is defined in AASB 136 Impairment of Assets as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Cash-generating units should be identified consistently from period to period for the same group of assets.

In allocating an impairment loss,an entity shall not reduce the carrying amount of an asset below the highest of:

When a cash generating unit containing goodwill is impaired,the impairment loss is allocated on a pro-rata basis across all of the assets in the cash generating unit.

Under AASB 136 Impairment of Assets,impairment of an asset and the accounting treatment using the cost model are which of the following?

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets is referred to as a/an:

Where the carrying amount of an asset exceeds the fair value less costs of disposal,it is necessary to calculate the value in use of the asset to determine whether it is impaired.

Any costs arising after the sale of an asset are included in the disposal costs of that asset.

The amount by which the carrying amount of an asset or a cash-generating unit exceeds its carrying amount is referred to as a/an:

Which of the following is not one of the guidelines in AASB 136 Impairment of Assets for identifying a cash-generating unit?

When an asset is measured at fair value,the appropriate journal entry to record an impairment loss will include which of the following entries?

AASB 136 Impairment of Assets requires disclosures about estimates and judgements made in the impairment testing process.

Nature and Regulation of Companies

Financing Company Operations

Company Operations

Fundamental Concepts of Corporate Governance

Fair Value Measurement

Accounting for Company Income Tax

Financial Instruments

Foreign Currency Transactions and Forward Exchange Contracts

Property, Plant and Equipment

Leases

Intangible Assets

Business Combinations

Disclosure: Legal Requirements and Accounting Polices

Disclosure: Presentation of Financial Statements

Disclosure: Statement of Cash Flows

Disclosure: Translation of Financial Statements Into a Presentation Currency

Consolidation: Controlled Entities

Consolidation: Wholly Owned Subsidiaries

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Investments in Joint Arrangements

Insolvency and Liquidation

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