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Question #1 The main purpose of IAS 36 Impairment of Assets is to establish rules to ensure that impairment losses are recognized on a consistent
Question #1
The main purpose of IAS 36 Impairment of Assets is to establish rules to ensure that impairment losses are recognized on a consistent or timely basis.
a) b)
c) d)
What is the definition of an impairment loss?
Describe how indications of possible impairment of assets might be identified.
Explain how an impairment loss is recognized in the financial records
Civil Engineering purchased an item of earth-moving equipment for $3 million. It is
estimated that the asset will have a 10-year life with a nil residual value. The business depreciates this class of asset on the straight-line basis. It is now the end of Year 3 and the asset has a market value of $1,800,000 with associated selling expenses of $50,000. The equipments value in use, based on its estimated future cash flows is currently $2 300 000.
Is the earth-moving equipment impaired? Explain.
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