IAS 36: Impairment of Assets

True or False
1. An active market is the market with the greatest volume and level of activity for the
asset or liability.
2. An impairment loss shall be recognized in profit or loss immediately.
3. The increased carrying amount of the asset due to a reversal of an impairment loss
shall not exceed the carrying amount that would have been determined had no
impairment loss been recognized in the prior years.
4. The reversal of the impairment loss shall be recognized immediately as an
adjustment of the opening balance of retained earnings.
5. The carrying amount of the asset shall be increased to the new recoverable amount.

Multiple Choice

1. The estimates of future cash flows in calculating value in use include all of the
following, except

a. Cash inflows from the continuing use of the asset

b. Cash outflows incurred to generate the cash inflows from the continuing use of the
asset
c. Net cash flows from the disposal of the asset at the end of the useful life
d. Future cost of improving or enhancing the assets performance

2. The internal sources 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. 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 the 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.

4. 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. Group

d. Cash generating unit

5. Which of the following statements is incorrect concerning the estimate 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 budget or financial forecast, usually
up to a maximum of 5 years.
c. Future cash flows do not include income tax receipts or payments.
d. The discount rate used in estimating future cash flows shall be the current rate after tax.

ANSWER KEY:
True or False
1.
2.
3.
4.
5.

False
True
True
False
True

Multiple Choice
1.
2.
3.
4.
5.

D
D
B
A
D