Certificate in International Financial Reporting Revenue, Inventories, and PPE 3

Question 1

Under IAS 36, an impairment loss is recognised when an asset's carrying amount exceeds its:

Accepted Answer

Recoverable amount

Answer

IAS 36 requires recognition of an impairment loss when carrying amount exceeds the higher of fair value less costs of disposal and value in use.

Question 2

What is 'value in use' under IAS 36?

Accepted Answer

Present value of future cash flows expected from the asset

Answer

Value in use is the discounted present value of the cash inflows and outflows attributable to the asset.

Question 3

Under IAS 36, how should an impairment loss for a cash-generating unit (CGU) be allocated?

Accepted Answer

First to goodwill, then pro-rata to other assets

Answer

IAS 36 requires the impairment loss to reduce goodwill first before being allocated pro-rata to other assets.

Question 4

Under IAS 16, subsequent expenditure on PPE should be capitalised when:

Accepted Answer

It is probable that future economic benefits will flow to the entity and cost can be measured reliably

Answer

Subsequent costs meeting the asset recognition criteria (probable benefits + reliable measurement) are capitalised.

Question 5

Under IAS 40, investment property is defined as property held for:

Accepted Answer

Rental income, capital appreciation, or both

Answer

IAS 40 defines investment property as property held to earn rentals or for capital appreciation.

Certificate in International Financial Reporting Practice Test