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25 Cards in this Set
- Front
- Back
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ASPE vs IFRS differences |
Back (Definition) |
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4 Steps for Impairment of Assets IAS 36 IFRS |
1) Determine assets grouped as CGU 2) Impairment test for tangible and intangible assets (Annually) 3) Determine Recoverable Amount which is the higher of FMV less costs of disposal or value in use 4) Record loss if any, which is recoverable amount less carrying value |
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When is by definition an asset impaired? |
When the entity is unable to recover carrying amount |
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What is the purpose of recording impairment? |
To ensure assets are not carried on balance sheet at no more than their recoverable amount |
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What is a CGU? |
Smallest group of assets that generates cash flows independent from other assets or group of assets |
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CGU plane example |
Easy to identify individual assets such as engine or plane seats, but these on their own do not directly generate cash but a plane as a whole does, thus the plane is the CGU |
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When do you test for impairment IFRS? |
When there is indicators of impairment and annually, ASPE only test when indicators annual tests not required |
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Indicators of impairment (external and internal) |
Back (Definition) |
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What is recoverable amount IFRS? |
Higher of a) Fair Value less costs of disposal b) Value In Use |
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What is Value In Use? |
Determined by discounting the estimated future cash flows from the assets or CGU’s continuing use and eventual disposal aka it is the amount expected to be recovered expressed in todays dollars by continuing to use the asset |
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Value in use - after or pre tax rate used in discounting? |
Pre Tax |
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Impairment Loss Formula |
NBV - recoverable amount |
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How do you apply an impairment loss to a CGU? |
On a pro rate basis based on each assets carrying amount |
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An individual asset in a CGU should not be written down to the highest of: |
A) FV less disposal costs B) Value In Use C) Zero |
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Entry to record impairment loss with contra asset account |
Dr. Impairment Loss Cr. Acc Impairment Loss |
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JE to record an impairment loss directly to a single asset |
DR. Impairment Loss Cr. Asset |
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Can impairment losses be reversed in the future? Discuss |
Yes they can be reversed if indication that recoverable amount has increased Asset is written up to the less of recoverable amount and carrying value that would of existed (net of depreciation) had the asset never been written down Important to note - this is what the NBV would be not back in the day had the reversal never taken olace |
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Impairment of finite intangible assets, explain |
Similar to PPE but must be tested annually for impairment even if no indication of such |
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Impairment of Goodwill |
Must always be assumed to be CGU, as it is not an identifiable asset and does not directly generate cash flow, through business combo it is assigned a CGU on acquisition date. Similar to PPE accounting for impairment losses except in the case of goodwill must first be applied to entire carrying value of goodwill and then prorated to remainder of assets in CGU based on the weight of their carrying values. |
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Key difference with ASPE |
monitor for impairment no annual checks required, if impairment exists the recoverable amount in terms of value in use is UNDISCOUNTED. Also unlike IFRS it is written down to fair value not recoverable amount.
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ASPEs version of “recoverable amount” |
un discounted future cash flows |
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Does aspe use CGU |
No it uses asset grouping, which is at higher level since CGU is only concerned with cash inflows but asset grouping is concerned with inflows and outflows |
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When to test for impairment aspe |
Looking for indicators of impairment is not required like with IFRS only if circumstances lead you to question it |
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ASPE “recoverable amt” and impairment approach 2 steps! |
1) Compare NBV to undiscounted net future cash flows ( ASPEs version of recoverable amt), if less its impaired 2) Then take FV of asset and minus carrying value, this is your impairment loss |
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Does aspe allow reversal of impairment losses? |
No thats why impairment losses tend to be credit directly to asset vs contra account under ASPE |
