Problem 29-2

1. An entity shall test an intangible asset with indefinite useful life or an intangible asset not yet
available for use, or goodwill acquired in business combination for impairment
a. Annually
b. Every 5 years
c. If there is an indication of impairment
d. On acquisition of subsidiary
2. The internal resources of information indicating possible impairment include all of the
following, except
a. Evidence of obsolescence or physical damage of an asset
b. Significant change in the manner or extent in which the asset is used with an adverse
effect on the entity
c. Evidence that the economic performance of an asset will be worse than expected
d. Significant decrease in the market value of the asset
3. The external resources of information indicating possible impairment include which of the
following?
I.
Significant change in the technological, market, legal or economic environment of
the business in which the asset is employed
II.
An increase in the interest rate or market rate of return on investment which will
likely affect the discount rate used in calculating value in use
III. The carrying amount of the net assets of the entity is more than its market
capitalization
a. I and II only
b. I and III only
c. II and III only
d. I, II and III
4. Which of the following statements is true in relation to recognition of impairment?
I.
An impairment loss shall be recognized in profit or loss immediately
II.
After the recognition of an impairment loos, depreciation charge for the future
periods shall be adjusted to allocate the revised carrying amount, less residual
value, on a systematic basis over the remaining useful life
a. I only
b. II only
c. Both I and II
d. Neither I nor II
5. Which of the following statements is incorrect concerning the estimation of future cash
flows?
a. Future cash flows shall be based on reasonable and supportable assumptions
b. Future cash flows shall be based on the most recent budgets or financial forecasts,
usually up to a maximum of five years
c. Future cash flows do not include income tax receipts and payments
d. The discount rate used in estimating future cash flows shall be the current rate
after tax

6. These are assets other than goodwill that contribute to the future cash flows of both the cash
generating unit under review and other cash generating units.
a. Corporate assets
b. Property, plant and equipment
c. Disposal group
d. Cash generating unit
7. Which of the following statements is incorrect concerning corporate assets?
a. Corporate assets are group or divisional assets such as head office building, EDP,
equipment or a research center
b. Essentially, corporate assets generate cash inflows independently from other
assets
c. The recoverable amount of an individual corporate asset cannot be determined unless
management has decided to dispose the asset
d. If there is an indication that a corporate asset may be impaired, the recoverable
amount of the cash generating unit to which the corporate asset belongs is determined
and compared with the carrying amount of the cash generating unit
8. When impairment testing a cash generating unit, any corporate assets shall
a. Be allocated on a reasonable and consistent basis
b. Be separately impairment tested
c. Be included in the head office assets or parents assets and impairment tested along
with that cash generating unit
d. Not be allocated to cash generating units
9. Which of the following statement is true concerning reversal of an impairment loss?
I.
The increased carrying amount of the asset due to a reversal of an impairment loss
shall not exceed that carrying amount that would have been determined had no
impairment loss been recognized in the prior years
II.
An impairment loss recognized for goodwill may be reversed in a subsequent
period
a. I only
b. II only
c. Both I and II
d. Neither I nor II
10.Which of the following statement is true concerning the reversal of an impairment loss?
I.
The reversal of the impairment loss shall recognize immediately as an adjustment
of the opening balance of retained earnings
II.
The carrying amount of the asset shall be increased to the new recoverable amount
a. I only
b. II only
c. Both I and II
d. Neither I nor II

Problem 29-3
1. If the fair value less cost of disposal cannot be determined
a. The asset is not impaired

2.

3.

4.

5.

6.

7.

8.

b. The recoverable amount is the value in use

c. The net realizable value is used
d. The carrying amount of the asset remains that same
If an asset is to be disposed of
a. The recoverable amount is the fair value less cost of disposal
b. The recoverable amount is the value in use
c. The asset is not impaired
d. The recoverable amount is the carrying amount
When deciding on the discount rate to be used in determining value in use, which factor
should not be taken into account?
a. The time value of money
b. Risk specific to the asset for which future cash flow estimates have not been adjusted
c. Risk specific to the asset for which future cash flow estimates have been adjusted
d. Pretax discount rate
An impairment loss that relates to an asset hat has been revalued shall be recognized in
a. Profit or loss
b. Revaluation surplus that relates to the revalued asset
c. Opening retained earnings
d. Any reserve in equity
What is the allocation of an impairment loss recognized for a cash generating unit?
a. Across the assets of the unit based on carrying amount
b. Across the assets of the unit based on fair value
c. First, to any goodwill, and the balance to the other noncash assets prorata based on
fair value
d. First, to any goodwill, and the balance to the other noncash assets prorata based
on carrying amount
Which of the following statements best describes value in use?
a. The present value of estimated future cash flows expected to arise from the
continuing use of an asset and from the ultimate disposal
b. The amount of cash or cash equivalents that could currently be obtained by selling an
asset in an orderly disposal
c. The amount which an entity expects to obtain for an asset at the end of the useful life
d. The amount at which an asset should be exchanged between knowledgeable and
willing parties in an arms length transaction
Which of the following terms best describes the higher of fair value less cost of disposal and
value in use?
a. Recoverable amount
b. Revalued amount
c. Depreciable amount
d. Carrying amount
Which of the following statements best describes the term impairment loss?
a. The removal of an asset from an entitys statement of financial position
b. The amount by which the carrying amount of an asset exceeds the recoverable
amount

c. The systematic allocation of an assets cost less residual value over the useful life
d. The amount by which the recoverable amount of an asset exceeds the carrying amount
9. Which of the following is not relevant in determining value in use of an asset?
a. The expected future cash flows from the asset
b. The carrying amount of the asset
c. Expectation about possible variation in the amount and timing of future cash flows
d. The time value of money
10.An entity is considering whether to apply an impairment test to an individual asset or to the
cash generating unit to which that asset belongs. Which of the following statements is true?
I.
If the individual asset does not generate cash inflows that are largely independent
of those from other assets, that cash generating unit shall be identified
II.
If the individual asset generates an insignificant proportion of the cash inflows of
the entity as a whole, the cash generating unit shall not be identified
a. I only
b. II only
c. Both I and II
d. Neither I nor II