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Exam 12: Long-Term Operating Assets: Departures From Historical Cost

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Question 51

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Following IFRS, which statement is false?

A) If the revaluation initially increases the long-term operating asset's carrying value, the firm records the difference between the carrying value and the fair value (the unrealized gain) in the revaluation surplus account.
B) The revaluation surplus account is a specific account reported in other comprehensive income (OCI) in the statement of comprehensive income.
C) The revaluation surplus account is a specific account reported as an unrealized gain in the statement of comprehensive income.
D) If a long-term operating asset's fair value decreases in subsequent accounting periods, after an earlier write-up, the firm reduces the revaluation surplus if it exists.

E) None of the above
F) B) and D)

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Question 52

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An impairment occurs when a long-term operating asset's carrying value falls below its total future cash-generating ability.

A) True
B) False

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Question 53

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When assessing the impairment of property, plant and equipment, fair value is also referred to as replacement cost.

For purposes of goodwill impairment evaluation, which of the following is not a characteristic of an operating segment of a public entity as defined in the Codification?

In 2009, Cilla Company acquired production machinery at a cost of $414,000, which now has accumulated depreciation of $250,000. The sum of undiscounted future cash flows from use of the machinery is $199,000 and its fair value is $148,000. What amount should Cilla recognize as a loss on impairment?

Before testing property, plant, and equipment (PPE) and finite-life intangible (FLI) assets, ________.

Which of the following statements regarding long-term operating assets classified as held for disposal is false?

Deluxe Corp. has four international divisions. One of them, Qaram Corp., was acquired on January 1, 2018, for £610,000,000 and recorded goodwill of £71,000,000 as a result of that purchase. At December 31, 2018, Qaram had a book value (including goodwill) of £375,000,000. The total recoverable amount of Qaram was £365,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS?

When an impairment occurs, the firm recognizes a loss on the income statement.

Which of the following is an impairment indicator for property, plant and equipment?

In 2011, DimDung Company acquired production machinery which now has a book value of ¥770,000. The discounted future cash flows from use of the machinery is ¥375,000 and its fair value less costs to sell is ¥355,000. DimDung has determined that an impairment loss has occurred. What is the carrying value of the machinery after the journal entry to record the impairment loss has been recorded under IFRS?

Stanvid Company provided the following information: Fair value of the reporting unit, including goodwill $\quad$ $\quad$ $1,400,000 Book value of reporting unit, excluding goodwill $\quad$ $\quad$ $\quad$ $1,000,000 Add: Carrying value of goodwill $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ 600,000 Carrying value of the reporting unit, including goodwill $\quad$ $1,600,000 The qualitative assessment of goodwill is completed and it is more likely than not that goodwill is impaired. Describe the process for determining if Stanvid needs to record a goodwill impairment loss and prepare any required journal entries.

Under IFRS, the recoverable value of a long-term operating asset is ________.

Deluxe Corp. has four international divisions. One of them, Pere Products, was acquired on January 1, 2018, for £494,000,000, and recorded goodwill of £52,000,000 as a result of that purchase. At December 31, 2018, Pere Products had a recoverable amount of £383,000,000. The December 31, 2018 book value of Pere Products was £356,000,000 (including goodwill) . What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS?

In 2013, Sopkiewicz International acquired production machinery at a cost of €860,000, which now has a book value of €380,000. The value in use of the machinery is €335,000 and its fair value less selling costs is €290,000. The company uses IFRS. a. Determine if an impairment loss has occurred. Explain. b. If an impairment loss has occurred, provide the journal entry to record the impairment loss and determine the new carrying value of the machinery.

Devo Co. has an indefinite-life intangible asset with a carrying value of $783,000. The undiscounted future cash flows expected to be realized from that asset total $830,000; the discounted cash flows are $574,000; and the fair value of the asset has been determined to be $657,000. What is the new carrying value of the asset after the impairment loss has been recorded?

Which of the following statements about the recoverable amount used in the IFRS impairment test of a long-lived asset is false?

Deluxe Corp. has four international divisions. One of them, RohrSchockt Inc., was acquired on January 1, 2018, for €744,000,000, and recorded goodwill of €85,000,000 as a result of that purchase. At December 31, 2018, RohrSchockt had value in use of €640,000,000 and a book value (including goodwill) of The total fair value of RohrSchockt was €654,000,000. What amount of loss on impairment of goodwill should Deluxe record in 2018 under IFRS? $€ 678,000,000$

Following U.S. GAAP, a firm recognizing an impairment loss must disclose both the asset or asset group impaired and the method used to estimate its fair value.

What is the nature of the recoverability test for indefinite-life intangible assets?