Question bank — IAS 36 — Impairment of Assets
428 questions in FR/EN/ES, scored by the real scoring engine.
Objective of the standard8 questions
- True or false? IAS 36 aims to ensure that no asset is shown in the statement of financial position at more than the amount the entity will recover from it, through use or through sale.True / falseL1
- True or false? The objective of IAS 36 is to require all assets to be remeasured at fair value at each reporting date.True / falseL1
- A trainee auditor asks what IAS 36 is for on the balance sheet. Which answer should they be given?Single choiceL1
- True or false? In addition to recognising impairment losses, IAS 36 specifies when an impairment loss must be reversed.True / falseL1
- Which of the following matters is NOT part of what the objective of IAS 36 announces?Single choiceL1
- True or false? As long as management intends to keep using an asset, IAS 36 allows it to remain in the statement of financial position at more than its use and sale would allow the entity to recover.True / falseL1
- According to the objective of IAS 36, through which routes can the entity recover the amount of an asset?Single choiceL1
- Valtorre Ltd holds a press carried at EUR 500,000. Analyses show that it will at best recover EUR 380,000, through use or through sale. Which statement is consistent with the objective of IAS 36?Single choiceL1
Scope and exclusions13 questions
- True or false? The inventories of a manufacturing entity are subject to the IAS 36 impairment test.True / falseL1
- True or false? An investment in an associate falls under IAS 36 for impairment, even though it is a financial asset.True / falseL1
- True or false? An investment property measured at fair value must, when there is an indication, be tested for impairment under IAS 36.True / falseL2
- True or false? A building accounted for under the revaluation model of another standard remains within the scope of IAS 36.True / falseL2
- Brenvel Ltd reports the following assets. Which one falls within the scope of the IAS 36 impairment test?Single choiceL1
- Why are assets such as inventories or deferred tax assets excluded from the scope of IAS 36?Single choiceL1
- Orlenne Ltd accounts for land under the revaluation model; the direct costs that a disposal would trigger are negligible. Which conclusion does IAS 36 allow it to draw?Single choiceL2
- Which of the following assets are excluded from the scope of IAS 36? (Several answers possible.)Multiple choiceL1
- The Castelmar group reviews the assets in its statement of financial position. Which of them fall under IAS 36 for impairment? (Several answers possible.)Multiple choiceL2
- At 31 December 20X1, Ardenvale Ltd holds: an investment in its subsidiary Corvel, a portfolio of bonds within the scope of IFRS 9 and a batch of goods held in inventory. Indications suggest that all three assets have lost value. Which of these assets must Ardenvale examine under IAS 36?Single choiceL2
- Mirabeau Ltd accounts for an owner-occupied building under the revaluation model, at a revalued amount of EUR 900,000. The direct costs of disposing of it would be significant (EUR 40,000). Management estimates the building's value in use at EUR 860,000. Which analysis is consistent with IAS 36?Single choiceL2
- Fenmoor Ltd has classified a former production site as a non-current asset held for sale. What does IAS 36 provide for this asset?Single choiceL1
- True or false? Contract assets and costs to obtain or fulfil contracts with customers are not tested under IAS 36.True / falseL2
Key definitions12 questions
- True or false? The recoverable amount of an asset is the higher of its fair value less costs of disposal and its value in use.True / falseL1
- True or false? An impairment loss is the amount by which the recoverable amount of an asset exceeds its carrying amount.True / falseL1
- Which definition matches carrying amount as used in IAS 36?Single choiceL1
- Which of these descriptions matches value in use?Single choiceL1
- Quaranne Ltd is planning to sell a machine. Which of these items is a cost of disposal as defined in IAS 36?Single choiceL2
- True or false? The value in use of an asset is determined using the assumptions that market participants would adopt, regardless of the entity's own expectations.True / falseL2
- Which definition matches a cash-generating unit (CGU)?Single choiceL2
- Hauterive Ltd operates three plants, each a cash-generating unit, and an IT centre that serves all three plants. How should the IT centre be described under IAS 36?Single choiceL2
- Which of the following statements about the carrying amount of a depreciable asset are correct? (Several answers possible.)Multiple choiceL1
- Which of the following statements correctly distinguish value in use from fair value less costs of disposal? (Several answers possible.)Multiple choiceL2
- True or false? The depreciable amount of an asset is its cost, or the amount substituted for cost in the financial statements, less its residual value.True / falseL2
- At 31 December 20X1, Lornac Ltd holds a bottling line with a carrying amount of EUR 1,000,000. Its fair value less costs of disposal is EUR 850,000 and its value in use EUR 920,000. What is the recoverable amount of the line?Single choiceL2
Assessment at each reporting date12 questions
- True or false? An asset is impaired when its carrying amount exceeds its recoverable amount.True / falseL1
- True or false? At each reporting date, the entity must estimate the recoverable amount of all its property, plant and equipment, whether or not there is an indication of impairment.True / falseL1
- What must an entity do at each reporting date for its assets within the scope of IAS 36 (other than assets subject to an annual test)?Single choiceL1
- True or false? An indication of impairment may lead the entity to review the useful life, depreciation method or residual value of an asset, even if no impairment loss is ultimately recognised.True / falseL2
- At 31 December 20X1, Pellmont Ltd identifies an indication of impairment on one of its warehouses. What is the immediate consequence under IAS 36?Single choiceL2
- At 31 December 20X2, Corbière Ltd identifies an indication of impairment on a packaging line (carrying amount: EUR 420,000). It estimates its recoverable amount at EUR 455,000. The analysis also shows that the line will be replaced earlier than planned. What should Corbière do?Single choiceL2
- At 31 December 20X1, Ravelin Ltd reviews an assembly line carried at cost and depreciated over 10 years. Its documented analysis reveals no indication of impairment. The finance director nevertheless wants the value in use of the line to be calculated. Which statement is correct?Single choiceL2
- Which of the following statements about assessing impairment are correct? (Several answers possible.)Multiple choiceL2
- Tamaris Ltd holds a truck with a carrying amount of EUR 60,000 and a recoverable amount of EUR 54,000. What can be concluded?Single choiceL1
- True or false? The requirements that determine when recoverable amount must be estimated apply both to an individual asset and to a cash-generating unit.True / falseL2
- For the 31 December 20X2 reporting date, the management accountant of Belvarde Ltd proposes to stop examining indications of impairment for its property, plant and equipment: in his view, these assets are depreciated and no loss has ever been recognised. How should this proposal be answered?Single choiceL2
- Ombrelle Ltd is preparing its annual reporting. Which of the following steps reflect what IAS 36 requires for a depreciated item of property, plant and equipment? (Several answers possible.)Multiple choiceL1
Mandatory annual tests12 questions
- True or false? Goodwill acquired in a business combination is tested for impairment every year, even if there is no indication of impairment.True / falseL1
- True or false? An intangible asset with an indefinite useful life is tested only if an indication of impairment arises at the reporting date.True / falseL1
- Which of the following assets must be tested for impairment annually even if there is no indication? (Several answers possible.)Multiple choiceL1
- Granvel Ltd, whose reporting date is 31 December, holds a brand with an indefinite useful life. When may it perform the annual impairment test of this brand?Single choiceL2
- True or false? When an intangible asset with an indefinite useful life was first recognised during the current annual period, it must be tested before the end of that period.True / falseL2
- Why does IAS 36 require an annual test for an intangible asset that is not yet available for use?Single choiceL2
- Sorélia Ltd has capitalised EUR 750,000 of development expenditure for a software platform that will not be available for use until 20X3. At 31 December 20X2, no indication of impairment has been identified and the project is on schedule. What does IAS 36 require?Single choiceL2
- Valdorine Ltd has a 31 December reporting date. Every year it tests a licence with an indefinite useful life on 30 June. On 1 October 20X1, it acquires a second licence, also with an indefinite useful life. There is no indication of impairment at 31 December 20X1. Which analysis is consistent with IAS 36?Single choiceL2
- For which of these assets is an impairment test required every year, whether or not there is an indication?Single choiceL1
- True or false? An entity may skip the annual test of its acquired goodwill in a year in which no indication of impairment has arisen, provided it resumes the test the following year.True / falseL2
- Which of the following statements about the annual test of intangible assets with an indefinite useful life or not yet available for use are correct? (Several answers possible.)Multiple choiceL2
- At 31 December 20X2, the Merlance group holds: an acquired customer list amortised over 6 years; internally developed management software, being finalised and not yet in use; the goodwill arising on the acquisition of Arbelle Ltd; a warehouse depreciated over 30 years. No indication of impairment is identified. Which assets must Merlance nevertheless test in 20X2?Single choiceL2
Indicators of impairment12 questions
- True or false? The carrying amount of an entity's net assets exceeding its market capitalisation is one of the external sources of information to consider when looking for an indication of impairment.True / falseL1
- True or false? An entity can conclude that there is an indication of impairment only if the situation observed matches one of the cases listed by the standard.True / falseL1
- True or false? A machine whose market value is stable may nevertheless show an indication of impairment if internal reporting shows that the actual cash flows it generates are significantly lower than budgeted.True / falseL2
- Which of the following is an internal source of information that may reveal an indication of impairment?Single choiceL1
- Transvaulx, a road haulier, is listing the indications of impairment affecting its fleet. Which of the following events is an external source of information?Single choiceL2
- Which of the following are among the indications of impairment that the entity must consider as a minimum?Multiple choiceL2
- Holvane holds a subsidiary, Brissac, presented at cost in its separate financial statements. During the year, Brissac pays it a large dividend. Which of the following pieces of information, together with this dividend, constitute an indication of impairment of the investment in Holvane's separate financial statements?Multiple choiceL3
- Vernalis operates a plant producing insulation panels. At the end of 20X1, the market value of comparable equipment is stable. However, internal reporting shows that the plant's net cash flows are 30% below budget and that the parent had to grant it unexpected cash advances to fund its operations. What conclusion should the controller reach?Single choiceL2
- Ostrale operates a patented manufacturing process that relies entirely on the know-how of a small team of engineers. In November 20X1, the whole team leaves to join a competitor and no replacement is feasible in the short term. The finance director argues that this situation does not appear as such in the standard's list of indications. Which position should be taken?Single choiceL3
- In September 20X1, the board of Talmeyre decides to sell, as early as 20X2, a printing press that it had planned to operate until 20X6. The market value of comparable presses has not changed and the machine is in perfect condition. How should this decision be analysed in terms of indications of impairment?Single choiceL3
- A cold-storage warehouse owned by Lunaria was severely damaged by fire in October 20X1. At the year-end, the accountant writes the analysis below. Which step contains the error?Single choiceL2
- Corvane, a listed company, reports at the end of 20X1 net assets with a carrying amount of 55,000,000 and a market capitalisation of 40,000,000. The analysis of indications written by a staff member includes the following steps. Which one is wrong?Single choiceL3
Materiality and sensitivity of the indicators8 questions
- In the previous year's test, Ferlane estimated the recoverable amount of a CGU at 40% above its carrying amount. This year, a minor indication appears, but no event since then could have eliminated this difference. What does the standard provide?Single choiceL2
- Short-term market interest rates have risen during the year. Pradel owns a hydroelectric plant with a remaining useful life of 35 years, and its analysis shows that the discount rate used for this asset is unlikely to be affected by this increase. What conclusion should be reached?Single choiceL2
- A previous analysis by Quintal showed that the recoverable amount of its distribution network is not sensitive to changes in the price of diesel. This year, that price fluctuates sharply, which management regards as an indication. No other new factor is identified. What does the standard allow?Single choiceL3
- In the 20X0 test, the recoverable amount of Sorbel's Packaging CGU exceeded its carrying amount by 25%. In 20X1, its main customer, which accounted for 45% of the CGU's revenue, terminates its contract. The finance director proposes not to re-estimate the recoverable amount, relying on the headroom found in 20X0. What should be concluded?Single choiceL2
- Market interest rates rise sharply in 20X1. Amarante operates car parks whose prices are contractually indexed to inflation. A sensitivity analysis performed in 20X0 showed that an increase in rates would come with a comparable increase in future cash flows, so that a significant fall in the recoverable amount would be unlikely. Nothing has changed in the contracts since then. What should be concluded for 20X1?Single choiceL3
- Belcourt owns a fleet of vessels with a remaining useful life of six years. In 20X1, market rates of return rise sharply and Belcourt considers that its discount rate will be affected. The last calculation showed a recoverable amount only 2% above the carrying amount, and no sensitivity analysis has been performed. What should be concluded?Single choiceL3
- Delvaux operates a network of water treatment plants with a remaining useful life of about 30 years. In 20X1, central banks raise their policy rates sharply: short-term rates increase markedly, long-term rates much less. The 20X0 test showed a recoverable amount 35% above the carrying amount, and a sensitivity analysis showed that a noticeable increase in the discount rate would not result in a significant impairment loss. No other event is identified. The finance director wonders whether a full new estimate is needed. Write a judgement memo.JudgmentL3
- In 20X0, Garance estimated the recoverable amount of its yoghurt production unit at 18,000,000, against a carrying amount of 12,000,000. In 20X1, internal reporting shows a gross margin slightly below budget, which the entity treats as an indication. No other significant event is identified. The consolidation manager asks whether a new full calculation is needed. Set out your position and its justification.JudgmentL2
Recoverable amount: higher of two measures12 questions
- True or false? The recoverable amount of an asset is the higher of two amounts: its fair value less costs of disposal and its value in use.True / falseL1
- True or false? Out of prudence, an entity uses as recoverable amount the lower of fair value less costs of disposal and value in use.True / falseL1
- True or false? If an asset's fair value less costs of disposal already exceeds its carrying amount, the entity does not need to estimate its value in use to conclude that the asset is not impaired.True / falseL2
- How is the recoverable amount of an asset determined?Single choiceL1
- Mirabel has decided to sell a disused warehouse: the sale is expected within a few months and the warehouse no longer generates operating cash flows. There is no indication that its value in use materially exceeds its fair value less costs of disposal. Which approach is appropriate for determining its recoverable amount?Single choiceL2
- Which of the following statements about determining the recoverable amount are correct?Multiple choiceL2
- At the end of 20X1, Arvel tests a hydraulic press that shows an indication of impairment. Its carrying amount is …. An expert estimates its fair value less costs of disposal at … and management calculates a value in use of …. What is the recoverable amount of the press?CalculationL2Variant
- Navalis operates a river cruise boat carried at … at 31 December 20X1. A specialist ship broker values the price Navalis would obtain for the boat, net of costs of disposal, at …, while management's projections result in a value in use of …. Determine the recoverable amount of the boat.CalculationL2Variant
- Kerlan owns a bottling line with a carrying amount of …. Its fair value, determined under IFRS 13 and given as a datum, is …; the costs of disposal of a sale are estimated at …. The value in use calculated by management amounts to …. Determine fair value less costs of disposal, then the recoverable amount of the line.CalculationL3Variant
- A logistics warehouse used by Pellion for its own deliveries is carried at …. According to an IFRS 13 valuation given as a datum, it could be sold for …, with costs of disposal of …. The cash flows expected from its use result in a value in use of …. Calculate fair value less costs of disposal and the recoverable amount of the warehouse.CalculationL3Variant
- Ondine tests a rolling mill with a carrying amount of 1,800,000. A firm offer from a buyer results in a fair value less costs of disposal of 2,100,000. The management controller proposes to also build a value in use model, whose expected result is about 1,600,000, and then to recognise an impairment loss of 200,000. What should be concluded?Single choiceL3
- To estimate the recoverable amount of a cold-storage warehouse, Brémond's finance team uses the average operating costs of the last three years and a simplified model, rather than a detailed line-by-line projection. The differences found against a detailed projection prepared last year were minimal. The auditor asks whether this approach is acceptable.Single choiceL3
Individual asset or cash-generating unit12 questions
- At what level should the recoverable amount be determined in principle?Single choiceL2
- In Castelbon's plant, a conveyor links the cutting machine to the packaging line. It generates no cash inflows separate from those of the production line. Its fair value less costs of disposal, limited to a scrap value, is below its carrying amount, and the entity continues to use it fully. An indication of impairment affects the line. At what level should the recoverable amount be estimated?Single choiceL2
- A crane truck owned by Fontrieu is used on a construction site and does not generate largely independent cash inflows. Its fair value less costs of disposal, observed on the second-hand market, is 310,000, against a carrying amount of 260,000. What can the entity conclude?Single choiceL2
- Rivesalte has decided to take a packaging line out of service and to sell it in two months; until then, the cash flows expected from its use are negligible. The line does not generate largely independent cash inflows and its fair value less costs of disposal, which can be measured, is below its carrying amount. At what level should its recoverable amount be determined?Single choiceL3
- In which of the following situations must the recoverable amount be estimated at the CGU level rather than for the individual asset?Multiple choiceL2
- Alcyon holds a brand with an indefinite useful life, tested within a CGU. It wishes to reuse for 20X2 the detailed calculation of recoverable amount made in 20X1. Which conditions must be met?Multiple choiceL3
- In addition to its main furniture manufacturing business, Hautbois operates a public pay car park next to its head office. The car park collects its own hourly takings, unrelated to furniture sales. An indication of impairment affects the car park. At what level should its recoverable amount be estimated?Single choiceL2
- Mérens holds a beverage brand with an indefinite useful life, tested within the Beverages CGU. The 20X0 detailed calculation showed a recoverable amount 40% above the carrying amount of the CGU. In 20X1, Mérens adds to this CGU an acquired plant and two production lines, almost doubling its assets; no other adverse event is identified. Can it reuse the 20X0 calculation for the 20X1 test?Single choiceL3
- Sorgue holds an operating licence with an indefinite useful life, tested on its own because it generates its own cash flows. The detailed calculation made in 20X1 showed a recoverable amount of 9,000,000 against a carrying amount of 5,000,000. In 20X2, no event affects the licence and management considers it very unlikely, in view of the circumstances, that its recoverable amount has fallen below its carrying amount. What can Sorgue do for the 20X2 test?Single choiceL3
- Tavel holds broadcasting rights with an indefinite useful life, tested within the Media CGU, whose composition has not changed since 20X0. The 20X0 detailed calculation gave a recoverable amount of 10,300,000 against a carrying amount of 10,000,000. Management wishes to reuse this calculation for 20X1 to save the cost of a valuation. Is this possible?Single choiceL3
- Coursan operates a quarry and the private railway line linking it to the national network. The line could only be sold for its scrap value, which is below its carrying amount, and it does not generate cash inflows independent of those of the quarry, which continues to use it fully. After a flood damaged the line, the accountant proposes to estimate the recoverable amount of the line alone, equal to its scrap value. What is the right approach?Single choiceL3
- In which of the following cases may the recoverable amount be determined for the individual asset, rather than for its CGU?Multiple choiceL3
Fair value less costs of disposal12 questions
- True or false? To obtain the fair value less costs of disposal of a machine, the entity deducts, among other things, the legal fees of the sale, the duties and taxes on the transaction and the cost of removing the machine, provided these costs are not already recognised as liabilities.True / falseL1
- True or false? When a company sells a workshop, the termination benefits it will pay to employees and the costs of reorganising its other sites after the disposal are costs of disposal to be deducted from the fair value of the workshop.True / falseL1
- Valmont plans to sell an industrial press. Which of the following costs is a cost of disposal to be deducted from the fair value of the press?Single choiceL1
- Kestral holds a cold-storage warehouse. There is no quoted price in an active market for an identical warehouse. Which statement is correct?Single choiceL2
- Embrun is disposing of a bottling line. Which of the following costs are costs of disposal to be deducted in determining fair value less costs of disposal? (several answers)Multiple choiceL2
- Brévalle is considering selling a packaging line. Its fair value, determined under IFRS 13, is … (given). The sale would involve … of legal fees, … of taxes on the transaction and … for dismantling and removing the line. Brévalle would also pay … of termination benefits to the operators after the disposal. None of these costs is recognised as a liability. What is the fair value less costs of disposal?CalculationL2Variant
- Hydrostal, a power plant operator, is putting a standby turbine up for sale; its fair value under IFRS 13 is … (given). To complete the deal, it will have to pay … of transfer duties, pay … to a law firm and incur … of overhaul directly needed to deliver the turbine in saleable condition. An expert report on the turbine, invoiced …, is already included in trade payables. Finally, Hydrostal plans … of reorganisation of its teams after the sale. Calculate the fair value less costs of disposal.CalculationL2Variant
- At the year-end, Corvane tests a laser-cutting machine with a carrying amount of …. Its fair value (IFRS 13, given) is …. A sale would involve … of legal costs and … of removal; Corvane also estimates at … the reorganisation of its workshop that would follow the disposal. None of these costs is recognised as a liability. Value in use, calculated separately, is …. Determine the fair value less costs of disposal, the recoverable amount and the impairment loss.CalculationL3Variant
- Aubrac Logistique owns a fleet of order-picking robots carried at …. An independent valuer sets its fair value under IFRS 13 at … (given), which is more than the carrying amount. However, disposing of the fleet would cost … of stamp duty, … of lawyer's fees and … of refurbishment directly required for the sale. A dismantling adviser has already invoiced …, an amount recognised as a payable at the year-end. Value in use is …. What are the fair value less costs of disposal, the recoverable amount and any impairment loss?CalculationL3Variant
- Selvane is putting a business plot of land up for sale; its fair value, determined under IFRS 13, is 900,000 (given). The notary has already drafted the preliminary agreement: the fees of 15,000 were invoiced and recognised as a trade payable before the year-end. Transaction taxes, i.e. 20,000, will only be due when the final deed is signed and are not yet recognised. What fair value less costs of disposal should Selvane use at the year-end?Single choiceL2
- Orbelis, an aerospace equipment manufacturer, built a unique test bench for its own needs, which shows indications of impairment. No transaction on comparable equipment can be observed and the valuer consulted states that there is no reliable basis for estimating the price at which an orderly transaction between market participants would take place. The carrying amount of the bench is 400,000 and its value in use is 340,000. What should Orbelis do?Single choiceL3
- Ferrandes operates a quarry that forms a cash-generating unit (CGU). The carrying amount of the CGU's assets is 1,000,000. A provision for site restoration is recognised at 400,000; any buyer of the quarry would have to assume this obligation. A firm offer covers the assets and the obligation together: the fair value less costs of disposal of this package is 520,000. The value in use of the assets, before taking the restoration obligation into account, is 560,000. What is the impairment loss of the CGU?Single choiceL3
Elements and steps of value in use13 questions
- True or false? Calculating value in use involves two steps: estimating the future cash inflows and outflows from continuing use of the asset and from its ultimate disposal, then applying an appropriate discount rate to them.True / falseL1
- True or false? Value in use is limited to a single scenario of future cash flows: expectations about possible variations in the amount or timing of those cash flows do not need to be reflected in it.True / falseL1
- Which of the following is one of the elements that the calculation of an asset's value in use must reflect?Single choiceL1
- True or false? The fair value of a warehouse includes the specific synergies that its current owner obtains from combining the warehouse with its own network of stores.True / falseL2
- To calculate the value in use of a fishing vessel, Morvent's analyst must reflect the price for bearing the uncertainty inherent in the vessel and its illiquidity. How can these elements be incorporated?Single choiceL2
- Which of the following are entity-specific factors, not available to other market participants, that value in use may reflect whereas fair value does not reflect them? (several answers)Multiple choiceL2
- The Tessaro group is testing a biscuit factory. The factory supplies the group's exclusive distribution network, which gives it synergies that no other buyer would obtain. The head of strategy prepares both the fair value less costs of disposal and the value in use of the factory. Which statements are correct? (several answers)Multiple choiceL3
- Fabrel estimates the net cash flows that an extrusion machine will generate over its remaining useful life of three years, including the ultimate disposal flow: … in the first year, … in the second and … in the third. The cash flows are assumed to be received at the end of each year. The discount rate used (given) is …. What is the value in use of the machine?CalculationL2Variant
- A river shipowner, Navilia, operates a barge with three operating years remaining. After all necessary outflows and the final net disposal proceeds, the expected cash surpluses amount to … at the end of the first year, … at the end of the second, when an exceptional charter contract is planned, and … at the end of the last. Navilia discounts these amounts at the given rate of …. Determine the value in use of the barge.CalculationL2Variant
- The Ardéco printing works is testing a rotary press with a carrying amount of … that will be used for two more years. The expected net operating cash flows, received at year-end, are … for year 1 and … for year 2. At the end of year 2, reselling the press should provide a net cash flow of …. The discount rate (given) is …. Current fair value less costs of disposal is …. Calculate value in use, recoverable amount and the impairment loss.CalculationL2Variant
- A veterinary clinic, Vetalpe, is reviewing a scanner carried in its statement of financial position at …. It has two years of use left. The finance department expects … of net operating cash at the end of the first year, then … at the end of the second, when the device would be sold to a refurbisher for an amount net of costs of disposal of …. The discount rate provided is …. A broker currently estimates the scanner's fair value less costs of disposal at …. Determine value in use, recoverable amount and the impairment loss.CalculationL2Variant
- Marivel operates a port terminal. It holds, personally, a non-transferable administrative authorisation to operate the terminal at night; a buyer of the terminal could not rely on it. How is this authorisation taken into account in the two components of the terminal's recoverable amount?Single choiceL3
- True or false? In value in use, the time value of money is represented by the current market risk-free rate of interest.True / falseL2
Basis for cash flow projections12 questions
- To calculate the value in use of a plant, Delmare relies on its budgets and forecasts. What period may these detailed budgets and forecasts cover?Single choiceL2
- Pradel is testing a production unit. Three sets of forecasts are available. Which one should serve as the basis for the cash flow projections in value in use?Single choiceL2
- Which of the following statements about the cash flow projections used for value in use are correct? (several answers)Multiple choiceL2
- Lavandor's analyst documents the value in use of an industrial laundry as follows: (A) he starts from the most recent budget approved by management; (B) he projects the cash flows year by year over nine years from detailed forecasts, with no evidence that Lavandor can forecast reliably over such a period; (C) beyond the detailed horizon, he extrapolates at a declining rate until the end of the useful life; (D) he compares his price assumptions with external market studies. Which step contains an error?Single choiceL2
- To test a restaurant chain, Caldero uses: a five-year budget approved by management (A); footfall assumptions cross-checked against public industry statistics (B); beyond year five, a steady growth of 6% a year until the end of the projection period, whereas the long-term average growth of this restaurant market is 2% and no justification is documented (C); an analysis of the variances between budgets and actual results over the last three years (D). Which item is an error?Single choiceL3
- Fontbrune runs an office furniture line in a mature market. After an approved five-year budget, its value in use model uses for the following years a growth rate that accelerates year after year, on the grounds that the brand is well known, without any objective information about the product or industry life cycle. The rest of the model complies. Which diagnosis is correct?Single choiceL3
- For four years, the actual cash flows of one of Sorelle's units have been about 20% below the budgeted figures. For this year's test, management uses a budget built on the same assumptions, claiming that the trend will reverse, although no new event has been identified. What should Sorelle do?Single choiceL3
- Two years ago Genalys launched a medical diagnostic device. Its approved budget covers five years. Studies published by the health authority and by several independent firms show that, for this type of device, adoption by hospitals accelerates for three years after year five before declining. May Genalys use an increasing growth rate for these three years of extrapolation?Single choiceL3
- Argentique Plus operates photo development laboratories. External market studies show that this sector is contracting by about 4% a year. After an approved five-year budget, management proposes to extrapolate the cash flows at +2% a year until the end of the equipment's useful life. Which approach complies?Single choiceL2
- You are reviewing the impairment test of a bottled water distribution subsidiary of the Hespéris group. Value in use rests on a five-year budget approved by management, then on growth of 5% a year beyond, whereas the long-term average growth of the national beverages market is 1.5%. The last three budgets overestimated actual cash flows by about 25%. Management justifies its figures by an export expansion project for which no contract has been signed and which has not yet been launched. Write a judgement memo on the reasonableness of the assumptions.JudgmentL4
- Éolis operates a wind farm with a remaining useful life of fifteen years. For its value in use, management wishes to use detailed forecasts over twelve years rather than five. It argues that almost all of the output is sold under a fixed-price purchase agreement covering that period and that, over the last ten years, its output forecasts have differed by less than 3% from actual results. For the three remaining years, it expects steady growth of 4% a year, whereas the long-term average growth of the electricity market concerned is 1%; no justification is provided. Write a judgement memo on the horizon and the extrapolation used.JudgmentL4
- The approved budget of Cimarel, a cement producer, forecasts a sharp rise in selling prices from next year. Forecasts published by the industry federation and by two economic institutes indicate, on the contrary, that prices will stagnate for several years. How should Cimarel approach its value in use projections?Single choiceL3
Composition of estimates of future cash flows13 questions
- Panifor is calculating the value in use of an industrial bread production line. Which of the following cash flows must be included in the projections? (several answers)Multiple choiceL2
- For a refrigerated transport cash-generating unit (CGU), Glacéo must avoid any double counting in its value in use projections. Which of the following cash flows must it exclude? (several answers)Multiple choiceL2
- The Ostréa group is testing a cannery. Its central IT department, accounting services and pooled purchasing work for all the group's plants. Management control has a stable allocation key, based on volumes produced, which each year allocates a share of these costs to the cannery. How should these overheads be treated in the cannery's value in use?Single choiceL2
- The Thermalis spa forms a cash-generating unit (CGU) comprising a building with a long useful life and circulation pumps that must be replaced every four years to maintain the current level of service. For year 3 of its projections, operating outflows excluding the pumps amount to 300,000 and the replacement of the pumps, planned for that year, will cost 60,000. The finance director proposes to exclude this replacement, which he describes as an investment. What amount of outflows should be used for year 3?Single choiceL3
- For the first projection year of the value in use of a sawmill, Brisac's analyst included: (A) cash receipts from future sales of sawn timber; (B) collection of 120,000 of trade receivables in the statement of financial position at the test date; (C) day-to-day servicing expenditure on the saws; (D) a share of head-office costs allocated using a reasonable key. Which item is wrong?Single choiceL2
- Tolvane is estimating the net disposal cash flow of a folding machine that will be sold at the end of its useful life, in eight years. Its analyst: (A) starts from the amount that knowledgeable, willing parties would obtain in a disposal; (B) adjusts this price for the expected effects of general and specific future price changes up to the disposal date; (C) uses as a basis the current price of an identical new folding machine; (D) deducts the estimated costs of disposal. Which step is wrong?Single choiceL3
- Panelis is preparing year 1 of the value in use projections for an insulating panel production line. It expects … of receipts from the line's future sales, … of payments for materials and staff, … of overheads allocated to the line using a reasonable key and … of day-to-day servicing. Its cash forecast also contains the collection of … of trade receivables and the payment of … of trade payables, both recognised in the statement of financial position at the test date. What net cash flow should be used for year 1?CalculationL2Variant
- The Belcastel hotel group is assessing the value in use of a mountain hotel. For the next year, it expects … of accommodation and catering receipts, … of wages and supplies, … for the share of the central booking office charged to the hotel on a reasonable and consistent basis, and … of small routine repairs. The controller also added … of customer invoices already issued but not yet collected at the test date, and deducted … for the settlement of a lawsuit already provided for in the statement of financial position. What net cash flow should be used for the year?CalculationL2Variant
- Carvelle must estimate the net disposal cash flow of a milling machine that it will sell at the end of its useful life. Today, similar milling machines that have reached the end of their life under comparable conditions of use trade at … between knowledgeable, willing parties. The general and specific price change expected until the disposal date is estimated at … in total (given). Costs of disposal at that date are estimated at …. An identical new milling machine currently costs …. What net disposal cash flow should Carvelle use?CalculationL3Variant
- The haulier Transalpe is testing a fleet of trucks that it will resell as a whole at the end of its useful life. The used market today values at … a similar fleet that has reached the same end of life after comparable use. Transalpe estimates at … the cumulative effect of general and specific price changes until the resale (given). At that date, the sale will involve … of dealer commission and … of legal costs. An equivalent new fleet is worth …. What net disposal cash flow should be used in value in use?CalculationL3Variant
- Melvane is preparing the last projection year of an injection moulding press, which will be sold at the end of that year. It expects … of operating receipts, … of operating payments and … of reasonably allocated overheads. The disposal should bring in … between knowledgeable, willing parties, with … of costs of disposal. Its model also includes … of income tax and … of loan interest. What total cash flow should be used for this last year?CalculationL3Variant
- The Port-Aurel salt works are in the last operating year of their harvesting equipment. This year's value in use model includes: salt sales collected …, production payments …, a reasonably allocated share of central costs …, day-to-day servicing …, sale of the equipment at year-end to knowledgeable, willing parties …, with … of costs of disposal. The treasurer has also entered the repayment of a loan of … and the payment of … under an environmental provision already recognised. Determine the total cash flow for this last year.CalculationL3Variant
- Calanque Résidences is building a hotel whose carrying amount already includes 4,000,000 of work done. Another 1,500,000 of work remains to be paid during year 1 before the hotel is ready for use. A partial opening at the end of year 1 should generate 200,000 of receipts and 120,000 of operating payments. Management is testing the hotel at the year-end. What net cash flow should be used for year 1 in value in use?Single choiceL3
Asset in its current condition12 questions
- True or false? The board of Orvalis is studying a reorganisation plan for its plant but has not committed to it at the year-end. The staff cost savings expected from this plan must be included in the cash flows used for the plant's value in use.True / falseL2
- True or false? When an entity is committed to a restructuring within the meaning of IAS 37, the cash flows used for value in use include the savings expected from that restructuring, based on the most recent budgets approved by management.True / falseL2
- True or false? Since value in use relates to the asset in its current condition, the future maintenance expenditure needed to keep the level of benefits that an industrial furnace provides today must be excluded from the projected cash outflows.True / falseL3
- Brenvale is estimating the value in use of a bottling line in its current condition. Which of the following cash flows must be included in the projections?Single choiceL2
- Before the year-end, Calmeyre committed, within the meaning of IAS 37, to closing a workshop of its textile division and recognised a restructuring provision. How are the cash flows of this restructuring treated in the division's value in use?Single choiceL3
- At 31 December 20X1, Ternavia plans to invest 2,000,000 in 20X3 to increase the capacity of a logistics platform; the budget approved by management accordingly forecasts additional revenue from 20X4. No expenditure has yet been incurred. How should these items be treated in value in use at 31 December 20X1?Single choiceL3
- Halvero is preparing the value in use of its foundry unit at 31 December 20X1. It is not committed to any restructuring and has incurred no enhancement expenditure. Which of the following cash flows must be excluded from the projections?Multiple choiceL3
- The controller of Pélagor is justifying the value in use projections of a cash-generating unit made up of a vessel and deck equipment with a shorter useful life. Which of the controller's statements are correct?Multiple choiceL4
- At 31 December 20X1, Vestrame is testing the value in use of its packaging division. In November 20X1, it finalised and announced to its employees a plan to merge two sites; its legal department concludes that it is committed to the plan within the meaning of IAS 37, and a provision of 900,000 has been recognised. The most recent budget approved by management forecasts annual savings of 300,000 in rent and staff costs from 20X2. The controller proposes two other plans that are only under study: outsourcing maintenance (estimated savings of 120,000 a year) and an additional printing line. Which construction of the cash flows is correct?Single choiceL3
- Aubelune operates a four-star hotel, tested as a cash-generating unit at 31 December 20X1. Every year, it refreshes rooms (paint, bedding) to keep its current standard. Management has also approved a project to upgrade to five stars, with works planned in 20X3 and higher room rates afterwards; no works had been incurred at the year-end. Which projections comply with IAS 36?Single choiceL4
- Néridia, a network operator, is testing the cash-generating unit of its regional fixed network at 31 December 20X1. The budget approved by management includes a fibre upgrade programme, not yet started, that would cost 40,000,000 and sharply increase revenue per subscriber. Without this programme, value in use would be below the carrying amount; with it, value in use exceeds it. The budget also provides for the regular replacement of the network's active equipment, whose useful life is shorter than that of the infrastructure. The finance director argues that, since the budget is approved, all its lines must be used. Write a judgement memo on how the cash flows should be built.JudgmentL4
- Corvelle is testing the value in use of its distribution division at 31 December 20X1. In December 20X1, the board approved in principle a reduction in warehouse staff, but the detailed plan has not been finalised and nothing has been communicated to those affected; the announcement is planned for March 20X2. The legal department concludes that, under IAS 37, the entity is not committed at the year-end. Management nevertheless wants to include the expected salary savings, which would be enough to avoid an impairment loss. Write a judgement memo.JudgmentL3
Financing, tax and inflation consistency12 questions
- True or false? Dorlane financed a press with a bank loan: the annual interest on this loan must be deducted from the cash flows used for the press's value in use.True / falseL2
- True or false? Income tax payments and refunds are excluded from the cash flows used to estimate value in use.True / falseL2
- True or false? An entity may discount cash flows expressed in real terms, that is excluding general inflation, at a nominal rate that includes inflation, provided it applies the same method every year.True / falseL2
- Why are cash flows from financing activities excluded from the cash flows used for value in use?Single choiceL2
- Fenrival prepares its projections at constant prices, excluding general inflation. It nevertheless expects an increase in the price of energy well above general inflation. Which approach is consistent?Single choiceL2
- Since the value in use discount rate is a pre-tax rate, how must the cash flows be estimated?Single choiceL2
- The value in use spreadsheet of a cutting line at Gralmont describes four construction choices. Which one is an error?Single choiceL3
- For a cold storage warehouse, Isembre projects its cash flows by applying annual general inflation of 2% to prices and costs. It discounts them at a real pre-tax rate of 6%, provided by a valuer. Which of the following findings identifies the error?Single choiceL3
- The value in use calculation memo for a wind farm at Jarnelle sets out the following choices. Which one is wrong?Single choiceL3
- While reviewing the value in use of a Kerlande plant, you note the following items. Which of them must be corrected?Multiple choiceL3
- Which of the following cash flows are excluded from the estimate of the value in use of a Lumbreval workshop?Multiple choiceL2
- An analyst at Morvaine deducts from the cash flows of a port terminal the interest on the debt that financed it, then discounts those cash flows at the value in use discount rate. What is the consequence of this approach?Single choiceL3
Foreign currency future cash flows6 questions
- Nalvière, whose functional currency is the euro, is estimating the value in use of a mine operated by its Brazilian branch, whose cash flows are in reais. Which method complies with IAS 36?Single choiceL2
- At 30 September 20X1, Ostrevan calculates the value in use of a hotel in Japan, using cash flows in yen discounted at a rate specific to the yen. Its financial year ends on 31 December 20X1. Which rate should be used to translate the resulting present value into euros?Single choiceL3
- Perlaise, whose functional currency is the euro, holds a bottling plant in the United States. At 31 December 20X1, the net cash flows expected from this asset are … USD in 20X2 and … USD in 20X3, with no other cash flows. The appropriate pre-tax discount rate for the dollar is …. At 31 December 20X1, the spot rate is 1 USD = … EUR. Calculate value in use in dollars, then in euros.CalculationL2Variant
- A Swiss testing laboratory belongs to Quintavel (functional currency: euro). It will generate … CHF in one year and … CHF in two years, then nothing more. A pre-tax rate of … is appropriate for cash flows in Swiss francs. On the day of the test, 1 CHF is exchanged at spot for … EUR. What is the laboratory's value in use, in Swiss francs and then in euros?CalculationL2Variant
- At 31 December 20X1, Rambrune is testing a data centre located in the United Kingdom. Expected net cash flows, in pounds sterling: … in 20X2, … in 20X3 and … in 20X4. The treasury department provides: a pre-tax rate appropriate for the pound of …, a pre-tax rate appropriate for the euro of …, a spot rate at 31 December 20X1 of 1 GBP = … EUR and a forecast rate for 20X4 of 1 GBP = … EUR. Calculate value in use in pounds, then in euros.CalculationL3Variant
- A Canadian sawmill of Sablerac (functional currency: euro) must be tested at 30 June 20X1. The controller has the net cash flows in Canadian dollars for the next three years (…, … and …), a pre-tax rate suited to the Canadian dollar of … and a pre-tax rate suited to the euro of …. The controller also knows the spot rate at 30 June 20X1 (1 CAD = … EUR) and the average rate for the first half-year (1 CAD = … EUR). Determine value in use in Canadian dollars and its equivalent in euros.CalculationL3Variant
Discount rate16 questions
- True or false? The value in use discount rate is a post-tax rate, since the entity bears income tax on the profits generated by the asset.True / falseL2
- True or false? Ulvarède acquired a vessel with a subsidised loan at 2%: this borrowing rate must be used as the discount rate for the vessel's value in use.True / falseL2
- True or false? Vimorel has already adjusted the cash flows of its subsidiary in an unstable country by weighting business interruption scenarios linked to country risk. The discount rate must therefore not include a premium for that same country risk.True / falseL3
- Which description matches the discount rate to be used to calculate value in use?Single choiceL2
- No asset-specific rate is observable in the market for a Wendrac plant. Which approach complies with IAS 36 for estimating the discount rate?Single choiceL3
- The rate that reflects the time value of money and the risks specific to an asset corresponds to which return?Single choiceL2
- Xaintrel is adjusting its weighted average cost of capital, used as a starting rate, to discount the cash flows of a plantation located abroad. Which of the following items are among the adjustment factors to consider?Multiple choiceL3
- Yzerande's audit committee is examining the methodology note on the discount rate used in its impairment tests. Which of the note's statements are correct?Multiple choiceL4
- At 31 December 20X1, Zélandre is estimating the value in use of an injection moulding press with a remaining useful life of three years. The expected pre-tax net cash flows are … in 20X2, … in 20X3 and … in 20X4, received at year-end. The pre-tax discount rate, a single rate for the whole period, is …. What is value in use?CalculationL2Variant
- A refrigerated truck owned by Aldivar has only two years of operation left. It should bring in … at the end of the first year and … at the end of the second, net pre-tax amounts. The market requires a pre-tax return of … for an asset with this profile. Determine its value in use.CalculationL2Variant
- The value in use of a network of charging stations owned by Bérivane is sensitive to the term structure of interest rates. The expected pre-tax net cash flows are … at the end of year 1 and … at the end of year 2. The appropriate pre-tax rates are … for the one-year maturity and … a year for the two-year maturity; each cash flow is discounted at the annual rate for its own maturity. Calculate value in use.CalculationL3Variant
- A car park concession held by Cassignol expires in three years. Its pre-tax net cash flows, received at year-end, would be … in the first year, … in the second and … in the third. As risks differ by horizon, management uses a separate annual pre-tax rate for each maturity: … for one year, … for two years and … for three years, each cash flow being discounted at the rate for its maturity over its term. What value in use is obtained?CalculationL3Variant
- Dravelle is determining the discount rate for a plant located in an emerging country. It starts from its pre-tax weighted average cost of capital of …. The market would require a premium of … for country risk, which the cash flows do not reflect. It would also require a premium of … for raw material price risk, but the cash flows already include this risk through weighted price scenarios. The plant was financed with a subsidised loan at …. Which pre-tax discount rate should be used?CalculationL3Variant
- For a solar plant operated abroad, Escalvin uses as its starting point its pre-tax incremental borrowing rate of …. The cash flows do not take currency risk into account, for which the market would require an extra …. Country risk, valued by the market at …, is however already built into the cash flows through weighted interruption scenarios. The plant is financed by an intragroup loan at …. Determine the pre-tax discount rate.CalculationL3Variant
- Fontrebel is testing the cash-generating unit of its distribution subsidiary located in a country with high monetary instability. Management proposes discounting the cash flows, estimated pre-tax, at the group's post-tax weighted average cost of capital, with no adjustment. It points out that the subsidiary benefits from very favourable intragroup financing and that the cash flows already include, through weighted scenarios, the expropriation risk specific to the country. The cash flows, prepared in local currency, do not, however, reflect any currency risk. Write a judgement memo on the discount rate.JudgmentL4
- As no observable rate specific to a hydroelectric dam exists, Gerbaude uses a surrogate rate. What must this rate reflect?Single choiceL3
Present value techniques (Appendix A)6 questions
- In the traditional present value approach described in Appendix A of IAS 36, how is the risk specific to the asset built into the measurement?Single choiceL2
- The financial controller of Brivane is preparing a present value estimate for an impairment test. Which of the following practices comply with the general principles of Appendix A of IAS 36? (several answers)Multiple choiceL3
- For a specialised press, Ortalis expects a single net cash flow next year: 20,000 with a probability of 40% or 70,000 with a probability of 60%. An analyst argues that the expected cash flow is meaningless, since neither outcome equals that average, and proposes using 70,000. Which answer complies with Appendix A of IAS 36?Single choiceL3
- To compute the value in use of a bottling line, Valtera uses three scenarios for the net cash flow it will receive in one year: … (probability …), … (probability …) and … (probability …). The discount rate provided, …, contains no adjustment for the risks already reflected in the weighting of the scenarios. Compute the expected cash flow, then its present value.CalculationL3Variant
- Nordalis licenses out a process patent. Next year's net royalties, received at year-end, will depend on demand: … if it weakens (… chance), … if it holds steady (…) and … if it grows (…). The rate of … provided by group treasury is consistent with cash flows already weighted by their probabilities. Determine the expected cash flow and its present value.CalculationL3Variant
- Grimaldo expects a single cash receipt of … from using a piece of equipment, of which only the date is uncertain: in one year (probability …) or in two years (probability …). The applicable discount rates are … per year for a one-year maturity and … per year for a two-year maturity. Compute the expected present value of this receipt under the expected cash flow approach.CalculationL4
Recognition of an impairment loss12 questions
- True or false? For a machine measured under the cost model, the impairment loss is recognised immediately in profit or loss.True / falseL1
- True or false? When the estimated amount of the impairment loss exceeds the carrying amount of the asset, the entity always recognises a liability for the excess.True / falseL1
- For an individual asset, what does the impairment loss correspond to?Single choiceL1
- At the year-end, an industrial furnace of Lumarec, measured at cost, has a carrying amount of 500,000. The impairment test shows a recoverable amount of 520,000. What follows?Single choiceL2
- Which of the following statements on recognising an impairment loss on an individual asset are correct? (several answers)Multiple choiceL2
- Arvelo holds a grinding machine acquired for …, whose accumulated depreciation amounts to … at the year-end. An indication of impairment led to an estimate of its recoverable amount of …. What is the amount of the impairment loss?CalculationL1Variant
- At Belcastel, a refrigerated truck is carried at a cost of … less … of accumulated depreciation. After losing a haulage contract, the entity estimates its fair value less costs of disposal at … and its value in use at …. Determine the impairment loss to recognise.CalculationL2Variant
- Corvane measures its machines under the cost model. At the year-end, an injection moulding press has a carrying amount of … and a recoverable amount of …. Record the impairment entry.Journal entryL2Variant
- A games publisher, Pixalune, acquired a patent on a graphics engine, which it carries at cost less amortisation. The arrival of a competing technology leads it to estimate the recoverable amount of the patent at …, for a carrying amount of …. Record the accounting effect at the year-end.Journal entryL2Variant
- Kervela operates a depot measured at cost with a carrying amount of 40,000. Its estimates show that the calculated impairment loss would reach 55,000, as the depot is expected to generate net cash outflows. No other standard requires a liability to be recognised in this situation (given). How should this situation be treated?Single choiceL3
- Talmont measures its equipment at cost. An assembly line with a carrying amount of 210,000 has a recoverable amount of 168,000. To protect the year's profit, the finance director proposes charging the loss of 42,000 to reserves. What should you answer?Single choiceL3
- Ombrelle tests three assets measured at cost, whose recoverable amount can be determined individually (given). Asset A: carrying amount …, recoverable amount …. Asset B: carrying amount …, recoverable amount …. Asset C: carrying amount …, recoverable amount …. What total impairment loss is recognised in profit or loss?CalculationL3
Impairment of a revalued asset8 questions
- A building is carried under the revaluation model. How is its impairment loss recognised?Single choiceL2
- Hestine measures its warehouses under the revaluation model. At the reporting date, a warehouse has just been revalued to its fair value under IAS 16: its revalued carrying amount is …. Its disposal would involve costs of disposal of … and its recoverable amount, equal to its value in use, is …. The revaluation surplus relating to this warehouse amounts to …. Allocate the impairment loss between other comprehensive income and profit or loss.CalculationL2Variant
- A hotel of Miravel, measured under the revaluation model, has just been revalued to its fair value at the reporting date and is carried at …. Its disposal would involve costs of disposal of …. Falling occupancy reduces its value in use, which is its recoverable amount, to …. The balance of the revaluation surplus relating to this hotel is …. What part of the loss goes to other comprehensive income, and what part to profit or loss?CalculationL3Variant
- Fontbrune applies the revaluation model to the building of a hotel it operates; the hotel generates cash inflows that are largely independent of those of its other assets, so its recoverable amount can be determined individually. The building has just been revalued to its fair value at the reporting date: its revalued carrying amount is …. Its costs of disposal would be …; its recoverable amount, equal to its value in use, is estimated at … and the revaluation surplus of this building amounts to …. Record the impairment loss entry.Journal entryL2Variant
- Clos Varenne applies the revaluation model to a vineyard (land and vines, the vines being bearer plants within IAS 16); the grapes, agricultural produce, are excluded from this asset. After a hailstorm, the vineyard was revalued to its fair value at the reporting date: its revalued carrying amount is …. Its disposal would involve costs of disposal of …; as its value in use is …, its recoverable amount is its fair value less costs of disposal, i.e. …. The revaluation surplus recognised on this vineyard amounts to …. Record the impairment loss.Journal entryL3Variant
- Rocheval revalues its two buildings to fair value at each reporting date. The revaluation surplus of the North building is 70,000; that of the South building is 5,000. After the year-end revaluation, the IAS 36 test of the South building, whose costs of disposal are not negligible and whose value in use is below the revalued amount, shows an impairment loss of 20,000. The accountant proposes to charge the whole loss to the total of the revaluation surpluses (75,000), which covers it comfortably. Which treatment should be applied?Single choiceL3
- An office building of Belmonde is measured under the revaluation model and has just been revalued to its fair value at the reporting date; its revaluation surplus amounts to 90,000. The departure of its main tenant reduces its value in use and, as its costs of disposal are not negligible, its recoverable amount comes out 35,000 below its carrying amount. Out of prudence, the finance director wishes to recognise the loss in profit or loss. What is the correct effect?Single choiceL3
- The marina of Calanque Bleue measures its floating pontoons under the revaluation model. The main pontoon has just been revalued to its fair value at the reporting date, i.e. …; its disposal would involve costs of disposal of … and its value in use, which is its recoverable amount, is …. Its own revaluation surplus is …, while the harbour master's office, another revalued asset, carries a surplus of …. Determine the part of the loss recognised in other comprehensive income and the part recognised in profit or loss.CalculationL3Variant
Depreciation and deferred tax after impairment8 questions
- After an impairment loss has been recognised on a depreciable item of equipment, on what basis is the depreciation charge for subsequent periods computed?Single choiceL2
- At the end of 20X1, Ardéliane impaired an industrial boiler, now carried at …. Its residual value is estimated at … and its remaining useful life at …. It is depreciated on a straight-line basis. What is the depreciation charge for 20X2?CalculationL2Variant
- Quintessa acquired for … a licence to use a cosmetics brand. After an impairment loss, the licence is carried at …; it has … of use left and its residual value is …. Compute the annual straight-line amortisation from the following period.CalculationL2Variant
- A cable car at the Valmorine resort cost …. It is depreciated on a straight-line basis over …, with a residual value of …. After … of operation, a lasting fall in visitor numbers leads to an estimated recoverable amount of …; the residual value and the total useful life are unchanged. Compute the impairment loss, then the annual depreciation charge for the following years.CalculationL3Variant
- A printing company, Typhanie, impaired a rotary press at the end of 20X1; its carrying amount now stands at …. The residual value is … and the remaining useful life is …. Record the straight-line depreciation entry for 20X2.Journal entryL2Variant
- At 1 January 20X3, a flight simulator of the Aéralis school shows a cost of …, accumulated depreciation of … and accumulated impairment losses of …, recognised at the end of 20X2. Its residual value is estimated at … and it has … of use left. Record the straight-line charge for 20X3.Journal entryL3Variant
- Velloria recognises an impairment loss of 30,000 on an item of equipment, whose carrying amount falls from 100,000 to 70,000. The tax base of the equipment, set by tax rules, remains 100,000 (given). How are the deferred taxes relating to this equipment determined?Single choiceL3
- Before impairment, a recycling unit of Ecomira had a carrying amount of …. The entity recognises an impairment loss of …. The tax base of the unit, which the loss does not change under the applicable tax rules (given), is …. What is the revised carrying amount to be compared with the tax base, and by how much does the tax base now exceed it?CalculationL3
Identifying the cash-generating unit13 questions
- There is an indication that a packaging machine of Lavandor may be impaired. At what level must the recoverable amount be estimated?Single choiceL2
- What is the cash-generating unit of an asset?Single choiceL2
- The quarry of Montrenard has a private access road that serves only the quarry. The road could be disposed of only for a low salvage value, far below the cash flows expected from its use, and it generates no cash inflows independent of those of the quarry. There is an indication that the road may be impaired. At what level is its recoverable amount determined?Single choiceL3
- To assess whether the cash inflows of a group of assets are largely independent, which elements does the entity consider? (several answers)Multiple choiceL2
- Which of the following statements about the level at which the recoverable amount is estimated are correct? (several answers)Multiple choiceL3
- Hôtelvia operates five hotels located in five different towns. Each hotel has its own customers, bookings and cash receipts; management analyses results hotel by hotel and has already sold one establishment on its own. There is an indication of impairment for the Port-Aurel hotel, whose rooms and furniture do not generate independent cash inflows. Which CGU should be used?Single choiceL3
- Under a concession, Navilia operates four sea routes to islands. The concession requires it to operate all four routes: it cannot abandon any of them. The revenue of each route is separately identifiable and the route to the island of Kerbian is loss-making. Which CGU should be used to test the vessel assigned to this route?Single choiceL3
- Bricolis operates twelve DIY stores in different towns. Each store has its own customers and cash receipts; purchasing is negotiated by a common buying office. Management accounts present an income statement for each store, and the executive committee decides on closures and extensions store by store. The finance director argues that a single CGU should cover the chain, since purchasing is centralised. Which position should be adopted?Single choiceL4
- A laser cutter of Pradelle has been idle for several months and will remain so; the cash flows expected from its use are negligible. Its value in use can therefore be estimated to be close to its fair value less costs of disposal, measurable from dealer prices (given). It belongs to a workshop whose cash inflows are largely independent. There is an indication of impairment. At what level is the recoverable amount of the cutter estimated?Single choiceL3
- Aldara, a single legal entity, carries on three activities: dairy, road haulage and printing. Each activity has its own customers; management monitors them separately and is considering selling the printing business. For impairment testing, Aldara uses the entire entity as a CGU: the printing loss is thus offset by the profitability of the dairy. What do you think of this choice?Single choiceL4
- Cinévia operates six cinemas in six towns. Each cinema sells its tickets and confectionery to local customers; management accounts present a monthly income statement for each cinema, and the executive committee decides on refurbishments and closures cinema by cinema. There is an indication of impairment for the Montclar cinema, whose projectors and seats do not generate independent cash inflows. The finance director proposes testing the six cinemas together, as the profitability of the other sites comfortably covers Montclar. Write a judgement memo on the level of the test.JudgmentL4
- Éolisa operates several wind farms. One of them, with twelve turbines, is connected to the grid by a power line and a transformer substation built by Éolisa and used only by this farm. The farm sells its output to a single buyer and its cash inflows are independent of those of the other farms (given). The line could be disposed of only for a low scrap value, unrelated to the cash flows expected from its use. A landslide has damaged the line, which is an indication of impairment. The controller proposes testing the line alone on the basis of its scrap value; the finance director proposes testing all the group's farms together. Write a judgement memo.JudgmentL4
- The audit committee of Ostréa is reviewing the method for identifying CGUs. Which of the following statements are correct? (several answers)Multiple choiceL3
Output with an active market and internal transfer prices6 questions
- The Bauxor group operates an alumina mine whose entire output is delivered to its own smelter. Alumina is nevertheless traded on an active market. How should the mine be treated when identifying cash-generating units (CGUs)?Single choiceL3
- The subsidiary Verrania sells its entire output of flat glass to another unit of the group, at an internal transfer price below the prices on the active market for this glass. To estimate the value in use of Verrania's CGU, which selling prices does the entity use in the cash flow projections?Single choiceL3
- The Alpilait cooperative collects and pasteurises milk in a dedicated plant. The plant sells 40% of the pasteurised milk to third-party manufacturers, on an active market, and delivers the remaining 60% to the group's cheese factory. The financial controller proposes to treat the plant as a CGU only for the portion sold externally and to attach the portion delivered internally to the cheese factory. Which analysis is correct?Single choiceL3
- At Solvaro, the Synthesis CGU produces a solvent, traded on an active market, which it sells entirely to the group's Paints CGU at an internal price of 130 per tonne. Management estimates that future arm's length prices for the solvent will be around 100 per tonne. The Paints CGU shows indications of impairment and both values in use must be estimated. Which approach complies with IAS 36?Single choiceL4
- The Granitex group owns a quarry that delivers all its granite blocks to its own cutting plant. Raw blocks are traded on an active regional market, but the group invoices them internally at a price well below market. Management wishes to treat the quarry and the plant as a single CGU and to build the value in use projections on internal prices. Write a judgement memo on the identification of the CGUs and on the prices to be used.JudgmentL4
- The Electrovia group's power plant supplies, through a direct line, all the needs of the group's neighbouring aluminium smelter. The plant is connected to the grid, and electricity is traded on an active wholesale market. The auditor asks which element is decisive in concluding that the plant is a separate CGU. Which one?Single choiceL4
Consistent identification of units8 questions
- True or false? From one year to the next, an entity identifies its cash-generating units for the same asset or types of assets consistently, unless a change is justified.True / falseL2
- True or false? An entity may freely redraw its CGUs at each reporting date, choosing the grouping of assets that avoids recognising an impairment loss.True / falseL2
- True or false? When an asset belongs to a CGU different from the one used in previous periods and an impairment loss is recognised for that CGU, the entity provides the information about the CGU required by paragraph 130 of IAS 36.True / falseL3
- True or false? Once settled, an entity's identification of CGUs can never be changed, even when a genuine reorganisation of its operations justifies it.True / falseL2
- Which principle does IAS 36 apply to the identification of CGUs from one period to the next?Single choiceL2
- The types of assets aggregated in the South Logistics CGU of Transvalis changed during the year. Under IAS 36, in which case does this change lead to providing the information about the CGU required by paragraph 130?Single choiceL3
- For several years, the Marivo hotel group has treated each of its hotels as a CGU. This year, the Brevanne hotel has a recoverable amount below its carrying amount. With no change in the operation, management or marketing of the hotels, management proposes to combine Brevanne with two highly profitable hotels in the same region so that the combination shows no loss. What is the appropriate conclusion?Single choiceL3
- Textora operated two plants, each treated as a CGU. During the year, it genuinely merged the two sites: a single production line, a common customer base and integrated teams. The new combined operation is now tested as a single CGU, for which an impairment loss is recognised at the reporting date. Which analysis is correct?Single choiceL3
Carrying amount of a cash-generating unit14 questions
- Ferrolia is testing the Rolling Mill CGU. The cash flows used for its recoverable amount come from rolling machines (…), the workshop building (…) and a process patent used by the workshop (…). The workshop's trade payables amount to …; the recoverable amount was determined without considering them. A vehicle used exclusively by another unit (…) is recorded in the site's accounts. What is the carrying amount of the Rolling Mill CGU to be compared with its recoverable amount?CalculationL2Variant
- The Calanque hotel, operated by Azurhotels, forms a CGU. Its value in use is based on the revenue generated by the hotel building (…), the room furniture (…) and dedicated booking software (…). The hotel has debts to its suppliers (…) and a bank loan that financed the works (…); none of these debts is needed to determine the recoverable amount. Calculate the carrying amount of the CGU.CalculationL2Variant
- The Pierrelune quarry forms a CGU. Its assets have a carrying amount of …, and a provision for site restoration is recognised for …. Any buyer of the quarry would have to assume this obligation: the fair value less costs of disposal of the whole, obligation included, is estimated at …. Value in use, calculated without considering restoration outflows, is …. Determine the carrying amount to be compared, the recoverable amount and the impairment loss.CalculationL3Variant
- Nordmaris operates an offshore gas platform, which is a CGU whose assets have a carrying amount of …. It has recognised a decommissioning provision of …, an obligation that a buyer of the platform would have to assume. The price a buyer would pay for the platform and this obligation, less costs of disposal, is estimated at …. Value in use projections, prepared excluding decommissioning outflows, give …. What are the carrying amount to be used for the test, the recoverable amount and any impairment loss?CalculationL3Variant
- The private operator Ecodepots runs a waste landfill site, which is a CGU. The carrying amount of the facilities is …. A provision for closure and rehabilitation of the site is recognised for …; a sale of the site would transfer this obligation to the purchaser. A purchaser would pay, for the site and the obligation, a fair value less costs of disposal of …. Value in use calculated before any closure outflows amounts to …. Calculate the carrying amount to be compared, the recoverable amount and the impairment loss.CalculationL3Variant
- For practical reasons, Distrimax determined the recoverable amount of its West Warehouse CGU by including the warehouse's trade receivables (…) and trade payables (…). The recoverable amount thus obtained is …. The CGU's assets, excluding receivables, have a carrying amount of …. Determine the adjusted carrying amount of the CGU and the impairment loss.CalculationL3Variant
- The Verdalia garden centre chain is testing its Montclair store, which is a CGU. For simplicity, the finance department calculated the store's recoverable amount, …, by including trade customer accounts (…) and debts owed to nurseries (…). The store's other assets have a carrying amount of …. What is the adjusted carrying amount of the store, and what impairment loss must be recognised?CalculationL3Variant
- How is the recoverable amount of a cash-generating unit determined?Single choiceL2
- How are recognised liabilities treated in the carrying amount of a CGU?Single choiceL2
- Panetis is testing its Industrial Bakery CGU, whose recoverable amount was estimated from the production line's operating cash flows only, without considering financing. Which items are included in the carrying amount of the CGU? (several answers)Multiple choiceL2
- Why does IAS 36 require a CGU to include all the assets that generate, or are used to generate, the cash flows used for its recoverable amount?Single choiceL3
- The disposal of a CGU would require the buyer to assume a recognised restoration obligation. Which statements are correct? (several answers)Multiple choiceL3
- The kaolin mine of Kaolys forms a CGU. Its assets have a carrying amount of 3,000,000; a restoration provision of 700,000 is recognised, and any buyer would have to assume it. The mine's fair value less costs of disposal, obligation included, is 2,500,000; value in use excluding restoration outflows is 2,600,000. The controller compares 2,500,000 with 3,000,000 and proposes an impairment loss of 500,000. Which conclusion is correct?Single choiceL3
- The value in use projections of Agrifrais's Packaging CGU include the output of a labelling machine used exclusively by that unit. However, the labelling machine is recorded in the head office's accounts, and the controller left it out of the carrying amount of the CGU. What should be done?Single choiceL2
Allocating goodwill to cash-generating units12 questions
- For the purpose of impairment testing, to which units is goodwill acquired in a business combination allocated?Single choiceL2
- What upper limit does IAS 36 set for the unit or group of units to which goodwill is allocated?Single choiceL2
- Which statements about goodwill are correct under IAS 36? (several answers)Multiple choiceL2
- The Velonor group has acquired a chain of bicycle shops. Each shop is a CGU. Management monitors the goodwill from this acquisition at the level of the Urban Bikes group, which comprises five shops, within the Mobility operating segment. It has no monitoring of goodwill shop by shop. At which level is goodwill allocated?Single choiceL3
- Optimedia monitors goodwill at the level of its three divisions, each within a separate operating segment. Its internal auditor argues that IAS 36 requires it to design goodwill reporting CGU by CGU. What should be concluded?Single choiceL3
- For the purposes of IAS 21, the Hexaport group tracks the goodwill of each of its foreign subsidiaries, whereas it monitors goodwill for internal management at the level of its two regional divisions. What consequence does this finer tracking have for the level of the impairment test?Single choiceL3
- Brivane's audit committee is reviewing the goodwill allocation policy. Which statements comply with IAS 36? (several answers)Multiple choiceL3
- The Calderis group has three operating segments: Heating, Air Conditioning and Services. It has just acquired Thermalys, whose activities all fall within the Heating segment, where the synergies are expected, and the goodwill is monitored there by that segment's management. The finance director proposes to test this goodwill at the level of the whole group, where the headroom of the other segments would comfortably cover any loss. Which analysis is correct?Single choiceL3
- The retailer Primavente acquires the logistics company Flexroute. The business plan shows that most of the synergies will come from lower delivery costs in two existing Primavente CGUs, North Stores and South Stores, monitored separately by management within the same operating segment. Flexroute forms a third CGU, which will also benefit from the synergies to a lesser extent. The accountant proposes to allocate all the goodwill to the Flexroute CGU, on the grounds that the acquired assets are there. Which analysis is correct?Single choiceL3
- Lumivia, which has two operating segments (Public Lighting and Residential Lighting), has only ever monitored goodwill at the level of the entity as a whole. It acquires a manufacturer whose synergies will benefit both segments. The groups of CGUs in each segment allow a non-arbitrary allocation. How should Lumivia allocate this goodwill?Single choiceL4
- The Oceanis group acquires Medilab, a network of laboratories located in three countries. Oceanis has two operating segments; the expected synergies concern only the Health segment, where management monitors performance, goodwill included, at the level of two regional hubs, each grouping several CGUs. The controller proposes either to test the goodwill at the level of the whole group, or to create CGU-by-CGU reporting, aligned with the country-level tracking performed for IAS 21. Write a memo justifying the level at which goodwill is allocated.JudgmentL4
- The Ardentis group has acquired Nordhaven, which holds operating subsidiaries in Norway, Sweden and Denmark. For IAS 21, goodwill is assigned to each of these three foreign operations. Management monitors goodwill at the level of the Nordic hub, a group of CGUs that remains within the Northern Europe operating segment, where all the synergies are expected. The auditors question the level of the impairment test. Which analysis is correct?Single choiceL4
Completing the initial allocation8 questions
- True or false? If the initial allocation of acquired goodwill cannot be completed before the end of the annual period in which the business combination takes place, it must be completed before the end of the first annual period beginning after the acquisition date.True / falseL2
- True or false? As long as the integration of the acquiree is not complete, the acquirer may defer the initial allocation of goodwill to CGUs without any time limit.True / falseL2
- True or false? When the initial accounting for a business combination can be determined only provisionally at the end of the reporting period, the initial allocation of goodwill may not be completed during the period of the combination; the entity then provides the information required by paragraph 133.True / falseL3
- Valtera, whose reporting date is 31 December, acquires Brisol on 1 October 20X1. The initial allocation of goodwill is not complete at 31 December 20X1. What is the deadline for completing it?Single choiceL2
- The Sorelis group's annual periods end on 30 June. It acquires Kalinor on 1 March 20X1. At 30 June 20X1, the initial allocation of goodwill is not complete. By what date at the latest must it be completed?Single choiceL3
- On 1 November 20X1, Aquilon acquires Brumelle; its reporting date is 31 December. At that date, the valuation of Brumelle's intangible assets is not finished: goodwill is recognised on a provisional basis under IFRS 3, and its allocation to CGUs is not complete. Which approach complies with IAS 36?Single choiceL3
- The Corvane group, whose reporting date is 31 December, acquired Delmont on 1 February 20X1. The integration programme is due to last until mid-20X3, and management wishes to wait until it ends, in 20X3, to allocate the goodwill to CGUs, as the final organisation has not been decided. What position should the auditor take?Single choiceL3
- Why may the initial allocation of goodwill not be completed at the end of the annual period in which the business combination took place?Single choiceL2
Disposal of an operation and reorganisation8 questions
- The Valmont group disposes of a cutting workshop that was part of a cash-generating unit (CGU) to which goodwill has been allocated. Which treatment of goodwill is correct in determining the gain or loss on disposal of the workshop?Single choiceL2
- Brenor disposes of its equipment rental branch, which was part of a CGU to which goodwill of … is allocated. At the disposal date, the value of the branch disposed of is estimated at … and that of the part of the CGU retained at …. No other method better reflects the goodwill associated with the branch. Compute the portion of goodwill to include in the carrying amount of the branch disposed of.CalculationL2Variant
- The Hestia group sells, for net proceeds of …, its hospital maintenance division, which was part of the Technical services CGU. The carrying amount of the division's identifiable net assets is …. Goodwill allocated to the CGU is …; the value of the division is estimated at … and that of the operations retained at …. No method more relevant than relative values has been demonstrated. Compute the goodwill derecognised with the division and the gain or loss on disposal.CalculationL3Variant
- The Orvalis group reorganises its reporting: the spare parts operation, until now part of the Equipment CGU, is transferred to the Services CGU. Goodwill allocated to the Equipment CGU amounts to …. The value of the operation transferred is … and that of the part remaining in the Equipment CGU is …. No other method better reflects the goodwill associated with the operation transferred. Compute the goodwill reallocated to the Services CGU and the goodwill remaining in the Equipment CGU.CalculationL3Variant
- To monitor its two markets separately, Tramontane splits its Distribution CGU, which carries goodwill of …, into two new units. The new East CGU takes over operations with a value of … and the new West CGU operations with a value of …. Management has identified no method more relevant than relative values. Compute the goodwill reallocated to each new unit.CalculationL3Variant
- Cerdagne disposes of its catering operation, part of a restaurant CGU carrying goodwill of 240,000. Data at the disposal date: operation disposed of, estimated value 200,000 and carrying amount excluding goodwill 150,000; part retained, estimated value 600,000 and carrying amount excluding goodwill 250,000. The management accountant proposes allocating goodwill in proportion to carrying amounts. No other method has been shown to be more relevant. What goodwill must be included in the carrying amount of the operation disposed of?Single choiceL3
- Pyla reorganises its reporting structure, which changes the composition of two CGUs to which goodwill has been allocated. Which statement correctly describes what happens to that goodwill?Single choiceL3
- Lorvane sells one of the shops of its regional network; the shop is an operation within the South network CGU, to which goodwill has been allocated. The finance director computes the gain or loss on disposal by comparing the selling price with the carrying amount of the shop's fittings and inventories only. What correction is needed?Single choiceL2
Testing units with goodwill12 questions
- How often must a CGU to which goodwill has been allocated be tested for impairment?Single choiceL2
- Ostrale, whose year ends on 31 December, has several CGUs to which goodwill has been allocated. Select the correct statements about the timing of the annual impairment test.Multiple choiceL2
- In its annual test, Fenwood reviews the Packaging CGU, whose assets excluding goodwill have a carrying amount of … and to which goodwill of … is allocated. The recoverable amount of the CGU is …. Compute the impairment loss of the CGU.CalculationL2Variant
- The Kerlann hotel group tests its Coast CGU, made up of three hotels. The unit's assets, excluding goodwill, have a carrying amount of …; the goodwill allocated amounts to …. The recoverable amount of the unit is estimated at …. No individual floor limits the reduction of the assets (given). Compute the impairment loss and its allocation between goodwill and the other assets.CalculationL3Variant
- Following the loss of a major customer (an indication of impairment), Quintal tests its Components CGU, to which goodwill of … has been allocated. The unit's other assets have a carrying amount of …. The unit's fair value less costs of disposal is … and its value in use is …. Determine the recoverable amount of the unit and the impairment loss.CalculationL3Variant
- In the annual test of its Rolling CGU, Marquise has the following carrying amounts: goodwill …, production plant …, factory building …. The recoverable amount of the unit is …. No individual floor limits the reduction of the assets (given). Compute the impairment loss, then the carrying amounts of the plant and of the building after the test.CalculationL4Variant
- A competitor launches a cheaper offer and Sirocco, a video game publisher, identifies an indication of impairment on its Studio CGU. Carrying amounts: goodwill …, computer equipment …, software licences (intangible assets) …. The recoverable amount of the unit is …. No individual floor is binding (given). Compute the impairment loss and the carrying amounts of the equipment and of the licences after allocation.CalculationL4Variant
- Goodwill acquired by Linor relates to its Transport CGU, but it could not be allocated to it: it is monitored at the level of a larger group of units. The Transport CGU contains no intangible asset with an indefinite useful life. How is the Transport CGU tested at its own level?Single choiceL2
- For the annual test of its Logistics CGU, Arbelle wishes to reuse the detailed calculation of recoverable amount made in the previous year. Which of the following situations prevents it from doing so?Single choiceL2
- Granvelle, whose year ends on 31 December, usually tests its CGUs on 30 June. In September 20X1, it acquires a business and allocates the resulting goodwill, 700,000, to a new Trading CGU. On 30 November 20X1, the assets of the Trading CGU excluding goodwill have a carrying amount of 2,100,000 and its recoverable amount is 2,650,000. What conclusion should be drawn for 20X1?Single choiceL3
- Dunmore's year ends on 31 December 20X2. Its Laboratories CGU carries goodwill of 400,000; the carrying amount of its other assets is 3,800,000. No indication of impairment was identified during the year and the finance director proposes not to test the unit. The auditor nevertheless obtains a test, performed at the usual date, which shows a recoverable amount of 3,950,000. What conclusion should be drawn?Single choiceL4
- The Sorel group reviews three CGUs. The Alpha CGU carries goodwill that has been allocated to it. The Beta CGU is related to goodwill that could not be allocated to it and is monitored at the level of a group of units. The Gamma CGU is in the same situation as Beta, but also includes a brand with an indefinite useful life that can be tested only as part of the unit. Select the correct statements.Multiple choiceL3
Order of testing6 questions
- Valcourt tests at the same time its Printing CGU, to which goodwill is allocated, and several rotary presses of that unit whose recoverable amount can be estimated individually. In what order must it proceed?Single choiceL3
- Ambrières's goodwill is allocated to a group of three CGUs, without it being possible to allocate it to each of them. The three units and the group are tested at the same time. Which approach is correct?Single choiceL3
- At Tessane, a kiln in the Ceramics CGU, to which goodwill is allocated, suffered a breakdown during the year: there is an indication of impairment for this kiln, whose recoverable amount can be estimated individually. The annual test of the CGU takes place in the same period. What must the company do?Single choiceL3
- Morvenne identifies an indication of impairment on a press in its Foundry CGU. The press has a carrying amount of 500,000 and an individual recoverable amount of 380,000. The CGU also includes other assets of 2,000,000 and goodwill of 300,000; its recoverable amount is 2,600,000. What impairment losses must be recognised?Single choiceL4
- Lisière's goodwill of 600,000 is allocated to the group formed by its Alpha and Beta CGUs, without it being possible to allocate it to each. The Beta CGU shows an indication of impairment: carrying amount 1,500,000, recoverable amount 1,300,000. The Alpha CGU has a carrying amount of 2,000,000. The recoverable amount of the group is 3,700,000. What losses must be recognised?Single choiceL4
- During a review, an auditor finds that Brévine tested directly the group of CGUs carrying its goodwill, whose recoverable amount far exceeds its carrying amount, without testing the Trading CGU, a member of the group, which nevertheless showed an indication of impairment. What conclusion should the auditor reach?Single choiceL4
Goodwill and non-controlling interests (Appendix C)9 questions
- Belmonte holds 70% of a subsidiary that is a CGU. Non-controlling interests were measured at their proportionate share of identifiable net assets, so that the goodwill recognised relates only to the parent's share. Which carrying amount of the CGU must be compared with its recoverable amount?Single choiceL3
- Calvène holds … of its subsidiary Rozel, which is a CGU. Non-controlling interests were measured at their proportionate share of identifiable net assets. At the year-end, the goodwill recognised amounts to … and the carrying amount of Rozel's identifiable net assets to …. The recoverable amount of the CGU is …. For the notional gross-up, the group extrapolates goodwill in proportion to the ownership percentage (given). Compute the grossed-up carrying amount of the CGU and the impairment loss recognised.CalculationL3Variant
- The Estérel group acquired … of Mirabel, which on its own forms a CGU; minority interests were measured at the proportionate share of identifiable net assets. The goodwill in the consolidated statement of financial position is …, Mirabel's identifiable net assets are carried at … and the recoverable amount of the unit is estimated at …. Notional goodwill is obtained by extrapolating goodwill in proportion to the ownership percentage (given). No individual floor is binding (given). Determine the loss recognised on goodwill, the loss allocated to the other assets and the total loss recognised.CalculationL4Variant
- Corbières holds … of its subsidiary Taurac, which on its own is a CGU. Non-controlling interests were measured at fair value under IFRS 3 (given): the goodwill recognised already includes their share and no notional gross-up is needed. Taurac's profit or loss is allocated in proportion to ownership percentages. The carrying amount of the CGU, including goodwill, is … and its recoverable amount is …. Allocate the impairment loss between the parent and the non-controlling interests.CalculationL3Variant
- The Arvieux group controls the Solenne clinic, of which it owns … of the share capital; the clinic forms a separate CGU. Non-controlling interests, measured at fair value at acquisition (given), are therefore already included in the goodwill recognised. The shareholders' agreement provides for profit to be shared in proportion to the capital held. At the test date, the unit is carried at …, including goodwill, while its recoverable amount is only …. What share of the loss goes to the group, and what share to the non-controlling interests?CalculationL4Variant
- The Network CGU of the Maubert group combines a wholly owned operation and the subsidiary Ondine, whose non-controlling interests were measured at fair value (no notional gross-up is needed). Before impairment, the CGU's goodwill relates to the wholly owned operation for … and to Ondine for …. The test shows a loss of …, charged entirely to goodwill. Allocate this loss between the part without and the part with non-controlling interests.CalculationL4
- Peyrac holds 90% of its subsidiary Velay, which is a CGU; non-controlling interests were measured at the proportionate share of net assets. The goodwill recognised is 270,000, which corresponds, by extrapolation to the ownership percentage (given), to total goodwill of 300,000. Velay's identifiable net assets have a carrying amount of 1,200,000 and the recoverable amount of the unit is 1,380,000. The controller proposes recognising a loss of 120,000. What loss must be recognised?Single choiceL4
- The Hautvent group has two 75%-owned subsidiaries, each forming a CGU. For the subsidiary Lys, non-controlling interests were measured at their proportionate share of identifiable net assets; for the subsidiary Iris, they were measured at fair value. For which of these CGUs must goodwill be notionally grossed up before the impairment test?Single choiceL3
- The subsidiary Brasque, 75% owned by Ourcq, is on its own a CGU; its non-controlling interests were measured at fair value. This year's test shows an impairment loss. On what basis is the loss allocated between the parent and the non-controlling interests?Single choiceL3
Corporate assets7 questions
- The Altaïs group has three CGUs: a fruit juice plant, a soft drinks plant and a distribution platform. Which of the following is a corporate asset for these CGUs?Single choiceL3
- Corvane's headquarters building shows an indication of impairment following a sharp fall in office property prices in its city. The company has not decided to dispose of the building, which serves all its CGUs. How must it proceed?Single choiceL3
- Ravel has two CGUs, A and B, served by a headquarters with a carrying amount of …. Management considers it reasonable and consistent to allocate the headquarters in proportion to the carrying amounts of the units (given): … for A and … for B. An indication of impairment arises for CGU A, whose recoverable amount is …. Compute the share of the headquarters allocated to A and the impairment loss of A.CalculationL3Variant
- The Bellerive group operates three branch networks (CGUs X, Y and Z) that share an IT platform with a carrying amount of …. After analysis, the key considered reasonable and consistent for allocating the platform is the number of connected workstations (given): … for X, … for Y and … for Z. Network Y, whose own assets have a carrying amount of …, loses a framework contract; its recoverable amount is estimated at …. Compute the share of the platform allocated to Y and the impairment loss of Y.CalculationL4Variant
- Fontcaude has two CGUs, M and N, which use a research centre with a carrying amount of …. No reasonable and consistent basis allows a portion of the centre to be allocated to each unit, but it can be allocated to the group formed by M and N. Test data: M, carrying amount … and recoverable amount …; N, carrying amount … and recoverable amount …; recoverable amount of the group M + N: …. Compute the loss of CGU N, then the additional loss identified at group level.CalculationL4
- Mareuil operates a data centre that serves its two CGUs, Insurance and Brokerage. A new technology makes some of the servers obsolete: there is an indication of impairment. The company does not plan to dispose of the centre, and usage measured in computing hours provides a reasonable and consistent basis for allocating it. The treasurer proposes estimating a value in use specific to the data centre by attributing to it an estimated share of the two units' cash flows. Which approach should be adopted?Single choiceL4
- The Navarre group has four CGUs: two plants, a store network and an online sales business. Its headquarters houses the finance, legal and human resources functions shared by all the units; its research centre works almost exclusively for the two plants. An indication of impairment arises for the online sales business. The management accountant proposes testing that business on its own assets only, on the grounds that the headquarters and the research centre do not belong to it. Write a judgement memo on the treatment of corporate assets in this test.JudgmentL4
Allocating an impairment loss within a unit12 questions
- Varenne Industrie recognises an impairment loss on a cash-generating unit (CGU) to which goodwill has been allocated. How should this loss be allocated among the assets of the unit?Single choiceL2
- When allocating the impairment loss of a CGU of Brévent Logistique, the pro rata share would reduce a warehouse below its fair value less costs of disposal, which is measurable. What does IAS 36 require?Single choiceL3
- The Harbour Cannery CGU of Halvard Foods comprises goodwill of …, a building with a carrying amount of … and machinery with a carrying amount of …. Its recoverable amount is estimated at …. No individual floor is binding. Calculate the loss allocated to goodwill, to the building and to the machinery.CalculationL2Variant
- A store of the Maison Ardent chain is a CGU. It carries goodwill of …, fit-out of …, equipment of … and checkout software of … (carrying amounts). After a competitor opens nearby, the recoverable amount of the store falls to …. No individual floor is binding. Determine the loss allocated to the fit-out and the carrying amount of the equipment after the allocation.CalculationL3Variant
- The Saint-Aubin Plant CGU of Corvel Métal comprises: goodwill …, production plant … (fair value less costs of disposal: …), vehicles … and furniture … (carrying amounts). The recoverable amount of the unit is …. The value in use of the plant cannot be determined; for the vehicles and the furniture, neither fair value less costs of disposal nor value in use can be determined. Calculate the loss allocated to the plant, to the vehicles and to the furniture.CalculationL3Variant
- A mountain hotel operated by Altissimo Resorts forms a CGU. After two seasons without snow, its recoverable amount is estimated at …. Carrying amounts: goodwill …, building …, furniture … and IT system …. A firm purchase offer makes it possible to establish the building's fair value less costs of disposal at …; no floor other than zero can be determined for the furniture and the IT system. Calculate the final loss allocated to the building, to the furniture and to the IT system.CalculationL4Variant
- The online travel agency Ventolia is a CGU carrying goodwill of … and other assets with a total carrying amount of …. Its recoverable amount is …. Calculate the carrying amount of goodwill after impairment and the loss allocated to the other assets.CalculationL2
- Brisach Imprimerie tests its Offset Printing CGU, which comprises goodwill of …, printing equipment of … and a building of … (carrying amounts). The recoverable amount of the unit is …. No individual floor is binding and all assets are measured at cost. Record the impairment entry.Journal entryL2Variant
- The restaurant Le Comptoir Sabline, acquired by a restaurant group, is a CGU to which goodwill of … is allocated. It also comprises kitchen equipment (…) and dining-room improvements (…), measured at cost. The closure of a nearby office district reduces its recoverable amount to …. No individual floor is binding. Record the impairment loss.Journal entryL3Variant
- The logistics hub of Ostrava Distribution is a CGU comprising goodwill of …, a warehouse of … and forklift trucks of … (carrying amounts, cost model). The recoverable amount of the unit is …. The warehouse's fair value less costs of disposal is …; no floor other than zero can be determined for the forklifts. Record the unit's impairment loss.Journal entryL4
- Quillan Énergies has allocated the loss of its Hydro Plant CGU: goodwill is reduced to zero and every other asset is already at its floor (the highest of its fair value less costs of disposal, its value in use and zero). A remaining loss of 30,000 is still unallocated. No other standard requires a liability to be recognised for it. What should the entity do?Single choiceL4
- The Valbonne Spa CGU of Aquaval includes a building measured under the revaluation model, with a revaluation surplus of 40,000. The allocation of the unit's impairment loss assigns a share of 25,000 to the building. How is this share treated?Single choiceL3
Asset whose recoverable amount cannot be determined6 questions
- An extruder of Ternay Plastiques has been damaged but is still working. Its value in use cannot be estimated individually, because it does not generate independent cash inflows, and its fair value less costs of disposal is below its carrying amount. The CGU to which it belongs is not impaired. What treatment applies to the extruder?Single choiceL3
- Orvalis operates a bottling line that is a CGU: carrying amount 900,000, recoverable amount 1,050,000. A labelling machine on the line, with a carrying amount of 90,000, has been damaged; its fair value less costs of disposal is 55,000 and its value in use cannot be estimated separately. What impairment loss should be recognised on the labelling machine?Single choiceL4
- The Foundry Workshop CGU of Malbrun, with no goodwill, comprises a furnace with a carrying amount of 100,000 and other assets of 300,000. Its recoverable amount is 320,000. The furnace is damaged: its value in use cannot be estimated individually and its fair value less costs of disposal is 70,000. No other asset has a binding floor. What impairment loss should be recognised on the furnace?Single choiceL4
- Under IAS 36, when the recoverable amount of an individual asset cannot be determined and its CGU is impaired, in which case is an impairment loss recognised on that asset?Single choiceL3
- The Cutting Line CGU of Pellerin Bois, with no goodwill, comprises an industrial saw with a carrying amount of 80,000 and other assets of 120,000. Its recoverable amount is 100,000. The value in use of the saw cannot be estimated individually; its fair value less costs of disposal is 55,000. The other assets have no binding floor. What is the carrying amount of the saw after impairment?Single choiceL4
- Why does IAS 36 describe as arbitrary the allocation of a CGU's loss among its assets other than goodwill, when the recoverable amount of each of them cannot be estimated?Single choiceL3
Indicators of reversal8 questions
- At each reporting date, an entity that has recognised an impairment loss on an item of property, plant and equipment must assess whether there is any indication that this loss has decreased or no longer exists.True / falseL2
- The assessment, at each reporting date, of indications that an impairment loss has decreased or no longer exists applies in the same way to losses recognised on goodwill.True / falseL2
- Which of the following are among the external indications of a reversal of an impairment loss listed in IAS 36?Multiple choiceL2
- Delvaux Textiles impaired a weaving loom in 20X1. Which of the following facts arising in 20X2 are internal reversal indications that require it to estimate the loom's recoverable amount again?Multiple choiceL3
- What link does IAS 36 draw between indications of a reversal of an impairment loss and indications of impairment?Single choiceL2
- Hautbois Médical has impaired both a stand-alone machine and a CGU. The general IAS 36 requirements on reversal (search for indications and conditions for a reversal) apply:Single choiceL2
- Navarre Cargo impaired a vessel at the end of 20X1, its value in use having been calculated with a discount rate of 9%. In 20X2, market interest rates fall markedly, which affects the discount rate applicable to the vessel. What must the entity do at the 20X2 reporting date?Single choiceL3
- Ibarra Composants impaired a press in 20X1. In 20X2, its internal reporting shows that the press performs better than expected. However, the estimated recoverable amount remains below the carrying amount, so no reversal is recognised. What consequence must the entity consider?Single choiceL3
Conditions for a reversal12 questions
- An impairment loss recognised on an asset other than goodwill is reversed only if the estimates used to determine its recoverable amount have changed since the last impairment loss was recognised.True / falseL2
- Ferrand Optique may reverse an impairment loss on a piece of equipment when its value in use increases solely because its future cash flows are getting closer in time.True / falseL2
- When the recoverable amount of an impaired asset is now based on its fair value less costs of disposal rather than on its value in use, this change of basis is a change in estimate that may justify a reversal.True / falseL3
- Ravel Agrégats impaired a crusher last year. Which of the following situations may justify reversing this impairment loss?Single choiceL2
- The conditions for a reversal are met for an asset other than goodwill of Moreau Céréales. To what amount is its carrying amount increased?Single choiceL3
- In economic terms, what does the reversal of an impairment loss reflect under IAS 36?Single choiceL3
- At the end of 20X1, Lorient Marine impaired a handling gantry crane, written down to its value in use of 400,000, calculated on five years of cash flows at 8%. At the end of 20X2, no assumption has changed: same annual cash flows, same rate. Recalculated, value in use is higher, solely because the cash flows are now closer. What should be concluded?Single choiceL2
- Vasquez Énergie impaired a turbine at the end of 20X1 based on its value in use, calculated at 11%. At the end of 20X2, the appropriate discount rate is revised to 8% because of changing market conditions; the expected cash flows are unchanged. The recalculated value in use exceeds the carrying amount. What should be concluded?Single choiceL3
- Orsini Immobilier impaired a warehouse at the end of 20X1; its recoverable amount was then its fair value less costs of disposal. At the end of 20X2, the warehouse's fair value, given and measured under IFRS 13, has increased thanks to the regeneration of the district; the estimated costs of disposal are unchanged and the new recoverable amount exceeds the carrying amount. Which analysis applies?Single choiceL3
- An accountant at Dumoulin Agro presents his analysis of a grain dryer impaired in 20X1. Which step contains an error?Single choiceL2
- Garonne Aéro impaired an assembly line in 20X1. Its management controller describes the analysis carried out at the end of 20X2. Which step is wrong?Single choiceL3
- Loire Froid impaired a cold-storage warehouse in 20X1 based on its value in use. At the end of 20X2, an internal auditor reviews the closing file. Which step is wrong?Single choiceL3
Reversal for an individual asset14 questions
- Kerbrat Mécanique measures its machines under the cost model. The conditions for reversing an impairment loss are met for one of them. Where is the reversal recognised?Single choiceL2
- What limit does IAS 36 impose on the carrying amount of an asset other than goodwill after the reversal of an impairment loss?Single choiceL2
- The recoverable amount of an impaired asset of Solenne Vitrages rises above the carrying amount it would have had without the impairment, net of depreciation. How does IAS 36 characterise the part of the increase above this cap?Single choiceL3
- Pontis Emballages impaired a packaging line two years ago. At the reporting date, as the estimates have changed, the line's recoverable amount is estimated at …. Its carrying amount is …; without the impairment loss, it would have been …, net of depreciation. Calculate the amount of the reversal.CalculationL2Variant
- Trans-Iroise acquires a refrigerated truck on 1 January 20X1 for …, depreciated on a straight-line basis over … years with no residual value. At the end of 20X2, after the depreciation for the year, it recognises an impairment loss of …; the remaining useful life is unchanged. At the end of 20X4, after the depreciation for the year and following a change in estimates, the truck's recoverable amount is …. Calculate the reversal at the end of 20X4 and the truck's carrying amount after the reversal.CalculationL3Variant
- The laboratory Lumen Diagnostics had impaired an amortised patent on a screening test after a competing process arrived. As this competitor has been withdrawn from the market, royalty forecasts are revised upwards and the patent's recoverable amount reaches …. The patent is carried at …; without the impairment, its carrying amount would be …, net of amortisation. What amount of reversal should be recognised?CalculationL3Variant
- At the reporting date, Nordhaven Gaz recognises a reversal of an impairment loss of … on a compressor whose carrying amount was …; this reversal amount already complies with the IAS 36 cap. The compressor's estimated residual value is … and its remaining useful life is … years. Calculate the carrying amount after the reversal and the annual straight-line depreciation for the following years.CalculationL3Variant
- Forages Delmas had impaired a drilling rig during a mining downturn. The recovery in activity leads to an upward revision of expected cash flows: the rig's recoverable amount is now …. Its carrying amount is … and would have been … without the impairment, net of depreciation. The residual value is estimated at … and the remaining useful life at … years. Calculate the reversal and the annual straight-line depreciation for the following years.CalculationL4Variant
- Bellerive Plasturgie measures its equipment at cost. An injection-moulding machine impaired three years ago has a carrying amount of …. As the estimates have changed, its recoverable amount is …; without the loss, its carrying amount would be …, net of depreciation. Record the reversal entry.Journal entryL2Variant
- The radiology practice Clinéa impaired an ultrasound scanner when new reimbursement tariffs reduced its expected cash flows. As these tariffs have been raised, the scanner's recoverable amount rises to …. Its amount in the statement of financial position is …; without the prior impairment, it would be … after depreciation. The scanner is measured under the cost model. Record the reversal.Journal entryL3Variant
- Belcastel Hôtels measures its buildings under the revaluation model. On a previous impairment of a building, a loss of … was charged against that building's revaluation surplus and a loss of … was recognised in profit or loss. At the reporting date, as the estimates have changed, a reversal of … must be recognised (given amount, determined under IAS 36 and the standard applicable to the building; depreciation effects are ignored). Record the reversal entry.Journal entryL4Variant
- The cooperative Terres de Sénart accounts for farmland under the revaluation model. After a flood, the land had first been revalued to its fair value under IAS 16; the IAS 36 test had then shown an impairment loss, as its costs of disposal were not negligible and its value in use was below the revalued amount: … charged against its revaluation surplus and … in profit or loss. The drainage works carried out since then change the estimates of value in use, and the reversal to be recognised this year is … (given amount). Record the reversal.Journal entryL4Variant
- Vigneaux Patrimoine measures an office building under the revaluation model. A prior impairment loss of 40,000 had been charged entirely against that building's revaluation surplus; nothing went to profit or loss. As the estimates have changed, a reversal of 28,000 must be recognised (given amount). Which treatment applies?Single choiceL4
- Arbois Céramique measures its kilns at cost. A kiln impaired two years ago has a carrying amount of 140,000; without the loss, its carrying amount would be 200,000, net of depreciation. As the estimates have changed, its recoverable amount is now 230,000. Which treatment applies?Single choiceL3
Reversal for a cash-generating unit6 questions
- Two years ago, Vellora impaired its packaging cash-generating unit. At the end of 20X3, the unit's carrying amounts are: goodwill …, building …, equipment …. Had no impairment loss been recognised previously, the carrying amounts, net of depreciation, would have been … for the building and … for the equipment; the recoverable amount of each asset on its own cannot be determined. The reversal to be allocated for the unit is …. What reversal is allocated to each item?CalculationL3Variant
- Daloz Printing operates a cash-generating unit carrying residual goodwill of …, a digital press (…), a process licence (…) and a fleet of vans (…). After a strong recovery in orders, the unit shows an impairment reversal of … to be allocated. Without the prior loss, the carrying amounts net of depreciation and amortisation would be: press …, licence …, fleet …. No individual recoverable amount can be determined. Calculate the reversal allocated to the press, the licence and the fleet.CalculationL3Variant
- At Marbek Foundries, the Moulding cash-generating unit comprises a melting plant (carrying amount …) and a set of tooling (carrying amount …); the unit's goodwill was fully impaired in the past. The impairment reversal to be allocated amounts to …. Without the prior loss, the carrying amounts net of depreciation would be … for the plant and … for the tooling. Individual recoverable amounts cannot be determined. What reversal is ultimately allocated to each asset?CalculationL4Variant
- Three years ago, the logistics company Arvanto recognised a loss on its regional hub, treated as a cash-generating unit. At the reporting date, the reversal to be allocated for this unit amounts to …. The warehouse has a carrying amount of …; a valuer has determined its own recoverable amount at …, whereas its carrying amount without the prior loss, net of depreciation, would be …. The automated sorter has a carrying amount of … and an amount without the prior loss of …; its own recoverable amount cannot be determined. Determine the reversal allocated to the warehouse and to the sorter.CalculationL4Variant
- The recoverable amount of a cash-generating unit that carries goodwill, and whose impairment loss had been allocated to goodwill and then to the other assets, increases on a lasting basis. The unit's assets are not revalued. How is the reversal treated?Single choiceL3
- The hotel group Solvane is reversing an impairment loss on its Resort cash-generating unit, with an amount of 40,000 to be allocated. The unit comprises goodwill of 15,000 (after the loss), the hotel building (carrying amount 300,000, amount without the prior loss 310,000) and the furniture (carrying amount 100,000, amount without the prior loss 150,000). Individual recoverable amounts cannot be determined. The controller proposes: building + 30,000, furniture + 10,000. Which allocation is correct?Single choiceL4
No reversal of goodwill impairment12 questions
- True or false? An impairment loss recognised for goodwill can never be reversed.True / falseL1
- True or false? When the recoverable amount of a cash-generating unit returns to its pre-impairment level, the loss previously allocated to its goodwill is reversed.True / falseL1
- True or false? If the goodwill impairment loss was caused by a specific external event, such as a competitor entering the market, and that event disappears, the entity may reverse the goodwill loss.True / falseL2
- True or false? The prohibition on reversing a goodwill impairment loss is explained in particular by the fact that a later increase in its recoverable amount would probably reflect internally generated goodwill.True / falseL2
- True or false? When a cash-generating unit carries impaired goodwill, the prohibition on reversal extends to all the unit's assets, none of which can then be subject to any reversal.True / falseL2
- Which statement about reversing an impairment loss for goodwill is correct?Single choiceL1
- Why does IAS 36 prohibit reversing an impairment loss recognised for goodwill?Single choiceL2
- In 20X1, Ternac impaired the goodwill of its Nutrition cash-generating unit by 100,000. In 20X2, the unit's recoverable amount increases by 60,000 thanks to the success of a new product range. What is the effect of this increase on goodwill?Single choiceL2
- The accountant at Brevalis handles the Optics cash-generating unit, whose goodwill had been impaired by 50,000 in 20X1, as follows: (1) in 20X3, he notes indications of an increase in value; (2) he computes the unit's new recoverable amount; (3) he increases goodwill by 50,000 to cancel the 20X1 loss; (4) he documents the assumptions used in the closing file. Which step is wrong?Single choiceL2
- In its 20X2 financial statements, Kalyste increased the goodwill of its subsidiary Nordwind, impaired in 20X0, by 30,000 and recognised that amount in other comprehensive income, explaining that the subsidiary has developed a strong reputation internally. Where is the error?Single choiceL2
- A trainee summarises the reversal rules for a cash-generating unit as follows. Which sentence of the summary contains an error?Single choiceL1
- The goodwill of Iridane's Sensors unit was fully impaired in 20X1. In 20X3, thanks to innovations designed by its own teams, the unit's value is well above its carrying amount. Management proposes to reinstate goodwill up to the 20X1 loss. What answer should be given?Single choiceL2
Disclosures by class of assets and by segment8 questions
- For each class of assets, what information about impairment losses and their reversals must an entity disclose?Single choiceL2
- When presenting information by class of assets, how is a class of assets defined?Single choiceL2
- Tamsel revalues its land and measures its machinery at cost. In 20X2, it recognised impairment losses and reversals on both classes. Which of the following must it disclose for each class of assets?Multiple choiceL2
- Norlis is preparing its note on property, plant and equipment, which contains the reconciliation of opening and closing carrying amounts. Where may it present the year's losses and reversals broken down by class of assets?Single choiceL3
- The Valtrion group presents segment information under IFRS 8 with three reportable segments. In 20X3 it recognised impairment losses and reversals, in profit or loss and, for revalued assets, in other comprehensive income. Which of the following must it disclose for each reportable segment?Multiple choiceL3
- Pelvane measures its office buildings under the revaluation model and its machinery at cost. In 20X2, an impairment loss of 50,000 was recognised on the buildings, of which 30,000 in other comprehensive income and 20,000 in profit or loss (split given), in the line item Depreciation, amortisation and impairment. A reversal of 8,000 was recognised in profit or loss on the machinery, in the line item Other income. For the Office buildings class, the draft note states only: impairment loss of 20,000 in profit or loss. What must be added?Single choiceL3
- In 20X3, the Ostrel group recognised several impairment losses on various assets, totalling 90,000: 60,000 on store fittings after shops were closed and 30,000 on software that became obsolete following a change in technology. These losses are not covered by the detailed disclosures required for each loss (given). What information must it disclose for these losses as a whole?Single choiceL3
- Ambrel does not present segment information under IFRS 8 (given). In 20X2 it recognised impairment losses on its warehouses and vehicles. What is its position regarding disclosures by segment and by class of assets?Single choiceL3
Disclosures for each impairment loss or reversal8 questions
- Corvail, which reports segment information, recognised a material impairment loss of 400,000 in 20X2 on a production line in its Industry segment. The line's recoverable amount is its value in use. Which of the following must it disclose about this loss?Multiple choiceL2
- The Hollis group recognised a material impairment loss on its West Network cash-generating unit. The unit's recoverable amount is its value in use, calculated with a discount rate of 9%, compared with 8% in the previous estimate. Regarding the recoverable amount, which of the following must be disclosed?Multiple choiceL3
- Dravos has materially impaired a cold-storage warehouse. Its recoverable amount is fair value less costs of disposal, categorised within Level 3 of the IFRS 13 hierarchy and determined by discounting cash flows (valuer's data). Which of the following must Dravos disclose?Multiple choiceL3
- Ravelle recognised a material impairment loss of 250,000 on its South Distribution cash-generating unit. This year the unit was redefined: two depots previously tested separately are now grouped in it. What must the note contain as the description of the unit?Single choiceL3
- Tavira's draft note states: following a lasting fall in occupancy, an impairment loss of 180,000 was recognised on the Lake hotel, whose recoverable amount is 1,200,000. This recoverable amount is value in use, calculated with a discount rate of 8% (7% in the previous estimate). What is missing?Single choiceL2
- The Mireval group, which reports segment information, reversed in 20X3 a material impairment loss of 70,000 on a patent in its Health segment, following a regulatory approval. The patent's recoverable amount is its fair value less costs of disposal, categorised within Level 2 of the IFRS 13 hierarchy and determined using a market approach, without discounting (valuer's data). The draft note mentions only the amount of the reversal and the approval obtained. How should it be completed?Single choiceL4
- Orbelle, which reports segment information, recognised in 20X3 a material impairment loss of 600,000 on its East Paper Mill cash-generating unit (Packaging segment), following the loss of its main customer. The unit's recoverable amount of 2,400,000 is its fair value less costs of disposal, categorised within Level 3 of the IFRS 13 hierarchy and determined by discounting cash flows at a rate of 10%; the key assumptions relate to volumes and energy prices. The loss is allocated between machinery (450,000) and buildings (150,000). Draft the outline of the note on this loss.JudgmentL4
- In 20X3, Quessant reversed a material impairment loss of 120,000 on a vessel in its Freight segment, after a lasting recovery in freight rates. The vessel's recoverable amount is its value in use, calculated with a discount rate of 7% (8% in the previous estimate). The finance director argues that a reversal is good news that calls for no detailed disclosure and, failing that, that giving the current rate is enough. Write a judgement memo for the audit committee.JudgmentL4
Estimates for units with goodwill or indefinite-life intangibles8 questions
- The Sarrel group has allocated to its Beverages cash-generating unit goodwill that is significant compared with total goodwill. The unit's recoverable amount is its value in use; no loss was recognised in 20X2. Which of the following must be disclosed for this unit?Multiple choiceL3
- In November 20X4, Halvren acquired the Pirsa group. At the reporting date of 31 December 20X4, part of the resulting goodwill has not yet been allocated to a cash-generating unit, the initial allocation not being complete (a situation consistent with IAS 36, given). Which of the following must Halvren disclose?Multiple choiceL3
- The retail chain Zephan has spread total goodwill of 3,000,000 across 12 regional cash-generating units; the amount allocated to each is not significant compared with total goodwill. For 8 of these units, which together carry 2,200,000 of goodwill, a significant amount, the recoverable amount is based on the same key assumptions (footfall and margin). What information must Zephan disclose?Single choiceL3
- Lumen has allocated significant goodwill of 900,000 to its Vision cash-generating unit. In the 20X3 test, value in use exceeds the unit's carrying amount by only 4%. Management considers reasonably possible a 1 point increase in the discount rate, which would make the carrying amount exceed the recoverable amount. No loss is recognised. What should be done regarding disclosures?Single choiceL4
- In 20X2, Brisk determined the recoverable amount of two cash-generating units: Transport, which carries neither goodwill nor an intangible asset with an indefinite useful life, and Media, which carries significant goodwill. What is the position on disclosing the key assumptions used?Single choiceL3
- For its Cables cash-generating unit, which carries significant goodwill, Quartz carries forward in 20X3 the detailed calculation of recoverable amount made in the previous period, the IAS 36 carry-forward conditions being met (given). The finance director wonders how to prepare the disclosures on this unit's estimates. Which answer is correct?Single choiceL4
- The Altamar group has allocated to its Cruises cash-generating unit goodwill of 5,000,000 and a brand with an indefinite useful life of 1,500,000, both significant. The recoverable amount is value in use, based on projections over 5 years, a growth rate of 2% beyond that period and a discount rate of 9%. The key assumptions are the occupancy rate and the average price per passenger, set using historical data and industry forecasts. A reasonably possible fall of 3 points in the occupancy rate would give rise to a loss. No loss is recognised. Draft the outline of the note on this unit's estimates.JudgmentL4
- At 31 December 20X4, the Belcastel group faces three situations: (a) goodwill of 800,000, arising from an acquisition made in December 20X4, has not yet been allocated, the initial allocation not being complete (a situation consistent with IAS 36, given); (b) goodwill of 1,200,000 is spread across 15 branches, each for a non-significant amount, the recoverable amount of 10 of them, which together carry 900,000 considered significant, being based on the same key assumption of revenue growth; (c) the Industry unit carries significant goodwill of 4,000,000. The finance director proposes to publish only a single table of goodwill by unit. Write a judgement memo.JudgmentL4