The rational entity impairment model
A) does not allow the reversal of previously recognized impairment losses.
B) is the method used under ASPE.
C) uses undiscounted cash flows in its determination of impairment.
D) compares the asset's carrying value with its recoverable amount.

Question

Quizplus · Accepted Answer

The rational entity impairment model compares the asset's carrying value with its recoverable amount to determine impairment. This is in contrast to the direct write-off method used under ASPE (choice B). The model also allows for the reversal of previously recognized impairment losses if there has been a change in circumstances (contrary to choice A) and uses discounted cash flows (contrary to choice C).

The Rational Entity Impairment Model