Question 1

IFRS requires disclosure of whether the recoverable amount of an impaired asset was fair value less selling costs or value in use.

Accepted Answer

IFRS requires entities to disclose whether the recoverable amount of an impaired asset is determined based on fair value less costs of disposal or value in use, as part of the impairment testing disclosures.

Question 2

Under IFRS, there is never an impairment loss related to goodwill when ________.
A) the value in use of the cash-generating unit is less than its fair value less cost to sell
B) the value in use of the cash-generating unit is greater than its fair value less cost to sell
C) the recoverable amount of the cash-generating unit less than the carrying value of the cash-generating unit
D) the recoverable amount of the cash-generating unit is greater than the carrying value of the cash-generating unit including goodwill

Accepted Answer

An impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount is greater, no impairment loss is recognized.

Question 3

If the company writes down the long-term operating asset in one period and still holds the asset in the next period, then the company cannot report an increase in value in the subsequent period.

Accepted Answer

A company can reverse a write-down if the asset's fair value increases in the subsequent period, but this depends on the accounting standards being followed. Under IFRS, reversals are allowed, while under US GAAP, they are generally not permitted for long-lived assets.

Question 4

A company selling or disposing of a long-term operating asset measures the asset at the lower of cost or net realizable value.

Accepted Answer

When a company decides to sell or dispose of a long-term operating asset, it must measure the asset at the lower of its carrying amount (cost) or net realizable value to ensure that the asset is not overstated on the balance sheet.

Question 5

Following IFRS, if the impairment loss is greater than the amount of reported goodwill, the firm first reduces the unit's other assets to their fair values, and then subtracts the remaining loss from goodwill.

Accepted Answer

Under IFRS, if the impairment loss is greater than the amount of reported goodwill, the goodwill is reduced to zero first, and any remaining impairment loss is allocated to other assets of the cash-generating unit on a pro-rata basis.

Question 6

Visdant Company provided the following information:
 $$\begin{array} { | l | r | } 
\hline \text { Fair value of Visdant, including goodwill } & \$ 2,100,000 \
\hline \text { Value in use of Visdant, } & \$ 2,000,000 \
\hline \text { Book value of Visdant net assets, excluding goodwill } & \$ 3,000,000 \
\hline \text { Add: Carrying value of goodwill } & \$ 600,000 \
\hline \text { Carrying value of Visdant, including goodwill } & \$ 2,400,000 \
\hline
\end{array}$$ 
The qualitative assessment of goodwill is completed and it is more likely than not that goodwill is impaired. Describe the process for determining if Visdant needs to record a goodwill impairment loss and prepare any required journal entries. Visdant follows IFRS.

Accepted Answer

The answer of Visdant Company provided the following information:
 \[\begin{array}...

Question 7

Following U.S. GAAP, a firm recognizing an impairment loss must separately disclose the amount of loss in the income statement.

Accepted Answer

The answer of Following U.S. GAAP, a firm recognizing an...

Question 8

When testing for the impairment of goodwill under IFRS, the recoverable amount of the cash-generating unit is calculated as ________.
A) the greater of the fair value of goodwill and the value in use of goodwill
B) the greater of the fair value less selling costs of the cash-generating unit and the value in use of the cash-generating unit
C) the lesser of the fair value of goodwill and the value in use of goodwill
D) the lesser of the fair value of the cash-generating unit and the value in use of the cash-generating unit

Accepted Answer

Under IFRS, the recoverable amount of a cash-generating unit is the greater of its fair value less costs to sell and its value in use. This is used to test for impairment of goodwill.

Question 9

Which of the following disclosure requirements for long-term asset impairment apply to IFRS but not to U.S. GAAP?
A) the events and circumstances that led to the recognition of the impairment
B) whether the recoverable amount was fair value less costs to sell or value in use
C) the amount of any impairment loss if not separately disclosed in the income statement
D) the asset that was impaired

Accepted Answer

Under IFRS, entities must disclose whether the recoverable amount of an impaired asset is based on fair value less costs to sell or value in use, which is not a requirement under U.S. GAAP.

Question 10

IFRS requires determination of an impairment loss for goodwill ________.
A) when the fair value of the cash-generating unit (including goodwill) is greater than the book value of its net assets (including goodwill)
B) when the book value of the cash-generating unit including goodwill is greater than its recoverable value
C) annually
D) whenever there are significant impairment indicators

Accepted Answer

The answer of IFRS requires determination of an impairment loss...

Question 11

Deluxe Corp. has four international divisions. One of them, Pere Products, was acquired on January 1, 2018, for £494,000,000, and recorded goodwill of £52,000,000 as a result of that purchase. At December 31, 2018, Pere Products had a recoverable amount of £383,000,000. The December 31, 2018 book value of Pere Products was £356,000,000 (including goodwill). What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS?
A) £138,000,000
B) £111,000,000
C) £27,000,000
D) -0-

Accepted Answer

The answer of Deluxe Corp. has four international divisions. One...

Question 12

Deluxe Corp. has four international divisions. One of them, RohrSchockt Inc., was acquired on January 1, 2018, for €744,000,000, and recorded goodwill of €85,000,000 as a result of that purchase. At December 31, 2018, RohrSchockt had value in use of €640,000,000 and a book value (including goodwill) of The total fair value of RohrSchockt was €654,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS? $$€ 678,000,000$$
A) €38,000,000
B) €66,000,000
C) €24,000,000
D) -0-

Accepted Answer

The answer of Deluxe Corp. has four international divisions. One...

Question 13

IFRS disclosure requirements are identical to U.S. GAAP in every respect with respect to long-term asset impairment except requirements related to impairment recovery.

Accepted Answer

IFRS and U.S. GAAP have different approaches to impairment testing and recognition, including differences in the impairment indicators, measurement, and reversal of impairment losses.

Question 14

Following U.S. GAAP, a firm recognizing an impairment loss must disclose both the asset or asset group impaired and the method used to estimate its fair value.

Accepted Answer

Under U.S. GAAP, firms are required to disclose the nature of the impaired asset or asset group and the method used to determine its fair value when recognizing an impairment loss.

Question 15

IFRS allows recoveries of impairment losses for property, plant, equipment and intangible assets. What related disclosures are required and at what organizational level are they required?

Accepted Answer

The answer of IFRS allows recoveries of impairment losses for...

Question 16

Which of the following is not a required disclosure requirement for long-term asset impairment under both U.S. GAAP and IFRS?
A) the events and circumstances that led to the recognition of the impairment
B) the method used to estimate the fair value of the asset
C) the amount of any impairment loss reversal if not separately disclosed in the income statement
D) the asset that was impaired

Accepted Answer

The amount of any impairment loss reversal is not a required disclosure requirement for long-term asset impairment under both U.S. GAAP and IFRS.

Question 17

Deluxe Corp. has four international divisions. One of them, Qaram Corp., was acquired on January 1, 2018, for £610,000,000 and recorded goodwill of £71,000,000 as a result of that purchase. At December 31, 2018, Qaram had a book value (including goodwill) of £375,000,000. The total recoverable amount of Qaram was £365,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS?
A) £235,000,000
B) £245,000,000
C) £10,000,000
D) -0-

Accepted Answer

Under IFRS, an impairment loss is recognized when the carrying amount of an asset exceeds its recoverable amount. The book value of Qaram, including goodwill, is £375,000,000, and the recoverable amount is £365,000,000. The impairment loss is the difference, which is £10,000,000.

Question 18

Which of the following statements regarding IFRS impairment testing for goodwill is false?
A) The firm reports an impairment loss when the recoverable amount of the cash-generating unit is less than the carrying value of the cash-generating unit, including goodwill.
B) If the impairment loss is greater than the book value of goodwill, the cash-generating unit proportionally reduces the carrying value of other assets.
C) The firm can perform the fair value measurement for each cash-generating unit at any time during the fiscal year, as long as it uses the measurement date consistently.
D) IFRS requires an impairment test for goodwill whenever there are significant impairment indicators.

Accepted Answer

The answer of Which of the following statements regarding IFRS...

Question 19

Under IFRS, the firm reports a loss from impairment of goodwill when ________.
A) the recoverable amount of the cash-generating unit is less than the carrying value of the cash-generating unit including goodwill
B) the book value of goodwill is greater than the fair value of goodwill
C) the three-step impairment test indicator shows goodwill has been impaired
D) the two-step impairment test indicator shows goodwill has been impaired

Accepted Answer

Under IFRS, an impairment loss for goodwill is recognized when the recoverable amount of the cash-generating unit is less than its carrying amount, including goodwill.

Question 20

The accounting for long-term operating assets held for sale or disposal under U.S. GAAP and IFRS is substantially identical.

Accepted Answer

The accounting for long-term operating assets held for sale or disposal under U.S. GAAP and IFRS is substantially identical, requiring the assets to be classified as held for sale and measured at the lower of carrying amount or fair value less costs to sell.

Quiz 12: Long-Term Operating Assets: Departures From Historical Cost

IFRS requires disclosure of whether the recoverable amount of an impaired asset was fair value less selling costs or value in use.

Under IFRS, there is never an impairment loss related to goodwill when ________.

If the company writes down the long-term operating asset in one period and still holds the asset in the next period, then the company cannot report an increase in value in the subsequent period.

A company selling or disposing of a long-term operating asset measures the asset at the lower of cost or net realizable value.

Following IFRS, if the impairment loss is greater than the amount of reported goodwill, the firm first reduces the unit's other assets to their fair values, and then subtracts the remaining loss from goodwill.

Following U.S. GAAP, a firm recognizing an impairment loss must separately disclose the amount of loss in the income statement.

When testing for the impairment of goodwill under IFRS, the recoverable amount of the cash-generating unit is calculated as ________.

Which of the following disclosure requirements for long-term asset impairment apply to IFRS but not to U.S. GAAP?

IFRS requires determination of an impairment loss for goodwill ________.

IFRS disclosure requirements are identical to U.S. GAAP in every respect with respect to long-term asset impairment except requirements related to impairment recovery.

Following U.S. GAAP, a firm recognizing an impairment loss must disclose both the asset or asset group impaired and the method used to estimate its fair value.

IFRS allows recoveries of impairment losses for property, plant, equipment and intangible assets. What related disclosures are required and at what organizational level are they required?

Which of the following is not a required disclosure requirement for long-term asset impairment under both U.S. GAAP and IFRS?

Which of the following statements regarding IFRS impairment testing for goodwill is false?

Under IFRS, the firm reports a loss from impairment of goodwill when ________.

The accounting for long-term operating assets held for sale or disposal under U.S. GAAP and IFRS is substantially identical.