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23 Cards in this Set
- Front
- Back
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How can an asset loose value |
As a result of physical damage, technological obsolescence or changes in the legal environment
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When is an asset considered to be impaired |
An asset is considered impaired once the value of the balance sheet is more than its recoverable amount |
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Why is it important that impaired assets be reflected at their accurate value? |
If not reflected at accurate value this violates the financial reporting concept of being true and fair value |
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Net Selling Price |
An assets fair value minus the cost of disposal |
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Value in Use |
Predicted benefits to be gained if the asset were to be put in use (The money that can be made from the asset)
....(if the asset were damaged this may reduce its production capacity) |
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Give an example of internal indications of impairment |
- Evidence of physical damage - Changes in the manner which the asset is used - Evidence that performance of the asset is worse |
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Give an example of external indication of asset impairment |
- Observable indicators that the assets value has declined more than expected - Changes in technological market - Increases in interest rate are likely to increase the discount rate used in calculating an assets value |
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How is impairment tested? |
The carrying amount (book value of the asset) to the recoverable amount. If the carrying amount is greater the asset is considered to be impaired |
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Recoverable amount |
This is the value that can be gained for the asset
("higher" of the fair value less cost of disposal) |
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Carrying Amount |
The amount at which an asset is carried on the balance sheet, less accumulated depreciation / amortisation. |
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An adjusting event is..... |
This is an event with conditions that were present during the reporting period (E.g. any information that provided evidence assets were impaired at balance sheet date.) |
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A non adjusting event.... |
This is when the conditions for the even arise after the accounting period. In regards to material, this information will be disclosed in the notes of the statement (E.g. an announcement of a plan to discontinue an operation) |
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What are the two types of government grant |
Grants related to assets Grants related to income |
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What are grants related to assetd |
Government grants made on the condition that the entity acquires a long germ asset |
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What is goodwill? |
These are the intangible assets that are owned by a firm that cannot be represented by a set value. E.g. geographical location, reputation & customer base |
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What is goodwill? |
These are the intangible assets that are owned by a firm that cannot be represented by a set value.
Goodwill is also the difference between the market value and the actual value of a firm E.g. geographical location, reputation & customer base |
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According to IFRS 10 what are the criteria for control |
The investor had rights that give it the ability to direct relevant activists Exposure| Rights to returns from its involvement The ability to use it's power over the investee to affect the amount of investor returns. |
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What are Consolidated accounts |
These are accounts that combine the parent and subsidiaries assets, liabilities, equity income and expenses as one |
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What is a Cash Generating Unit |
This is a group of assets that work together go generate cash flow
(Goodwill is an example of an asset that cannot generate cash flow on its own but in conjunction with other assets) |
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When is it possible for impairment to be reversed? |
Once there is evidence that listens have decreased or no longer exist. |
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Give an example of an internal situation in which impairment reversal can occur |
Significant Changes in the way the asset is used
Evidence that the economic performance of the asset is better than expected |
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Give an example of an external situation in which impairment reversal can occur |
Observational indications that the assets value has increased more than expected Changes in the technological maker that will benefit the asset |
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Cash Generating Units According to IAS 36 |
the smallest identifiable group of assets thatgenerates cash inflows that are largely independent of the cash inflows fromother assets or groups of assets |
