QUESTION 3 (IAS 38) IMPAIRMENT OF ASSETS Required Indicate whether each of the above statements is true or false and, provide a brief (10 marks) explanation for as to why you believe it to be true or false 1. The recoverable amount is the greater of value in use and fair value (1) 2. The recoverable amount must be calculated annually (1) 3. When calculating recoverable amount, the costs of disposal that we consider should not include finance costs and income tax expense (2) 4. Value in use reflects the present value of the net cash flows from using the asset whereas fair value less cost of disposal reflects the present value of the net cash flows from selling the asset (2) 5. When calculating value in use, we must use a pre-tax discount rate (1) 6. When calculating value in use of an asset, we should never include cash flows that are 7.All assets are tested for impairment in terms of IAS 38 Impairment of assets when there is will be recognised as an based on projections that exceed a 5-year period (1) 8.If an asset is impaired, the decrease in carrying amount impairment loss in profit or loss (1) END OF ASSIGNMENT QUESTION 3 (IAS 38) IMPAIRMENT OF ASSETS Required Indicate whether each of the above statements is true or false and, provide a brief (10 marks) explanation for as to why you believe it to be true or false 1. The recoverable amount is the greater of value in use and fair value (1) 2. The recoverable amount must be calculated annually (1) 3. When calculating recoverable amount, the costs of disposal that we consider should not include finance costs and income tax expense (2) 4. Value in use reflects the present value of the net cash flows from using the asset whereas fair value less cost of disposal reflects the present value of the net cash flows from selling the asset (2) 5. When calculating value in use, we must use a pre-tax discount rate (1) 6. When calculating value in use of an asset, we should never include cash flows that are 7.All assets are tested for impairment in terms of IAS 38 Impairment of assets when there is will be recognised as an based on projections that exceed a 5-year period (1) 8.If an asset is impaired, the decrease in carrying amount impairment loss in profit or loss (1) END OF ASSIGNMENT