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Exam 13: Long-Term Operating Assets: Departures From Historical Cost

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Question 1

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In 2011,DimDung Inc.Company acquired production machinery which now has a book value of ¥740,000.The undiscounted cash flows from use of the machinery is ¥365,000.and it's fair value is ¥350,000.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?

A) ¥390,000
B) ¥375,000
C) ¥365,000
D) ¥350,000

E) C) and D)
F) All of the above

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Question 2

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IFRS disclosure requirements are identical to U.S.GAAP in every respect except requirements related to impairment recovery.

A) True
B) False

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Question 3

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The accounting for assets held for sale or disposal under U.S.GAAP and IFRS is substantially identical.

In early 2015,Plattsville Plastics recently decided to dispose of an extrusion machine.The original cost was $460,000 and accumulated depreciation was $310,000.At that time,the machine was retired from operations,the book value of the machine approximated its fair value.On December 31,2016,the fair value of the machine was determined to be $110,000.Which of the following would be included in a related adjusting entry on December 31,2016.

IFRS requires disclosure of whether the recoverable amount of an impaired asset was net fair value or value in use.

Companies must continue to depreciate or amortize long-term operating assets while holding them for sale or disposal.

Regular Corp.has four divisions.One of them,Weeble Products,was acquired on January 1,2016,for $60,000,000,and recorded goodwill of $6,000,000 as a result of that purchase.At December 31,2017,Weeble Products had a fair value (including goodwill) of $37,000,000.and the book value of the company's net assets (without goodwill) was $44,000,000.The fair value of Weeble's net assets (without goodwill) at December 31,2017 was $33,000,000.What amount of loss on impairment of goodwill should Regular record in 2017?

U.S.GAAP requires that firms combine indefinite-life intangibles into an asset grouping if they are operated as a single asset.

In 2010,Mennora Corporation acquired production machinery at a cost of $410,000,which now has a book value of $190,000.The undiscounted cash flows from use of the machinery is $175,000.and it's fair value is $135,000.What amount should Menorrah recognize as a loss on impairment?

The method of accounting for impairment of long-term assets depends upon the type of loss that occurs.

When assessing assets for impairment in asset groups,the firm groups assets at the lowest level of identifiable and independent cash flows.

After recognizing the impairment,the firm carries the asset at its fair value less previously accumulated depreciation.

Explain the IFRS limitations on reversal of previously recognized impairment losses.

IFRS impairment testing for finite-life intangible assets is similar to impairment testing for tangible long-lived assets.

If the impairment loss is greater than the amount of reported goodwill,the firm first reduces unit's other assets to their fair value then subtracts the remaining loss from goodwill.

Under IFRS,the firm repots a loss from impairment of goodwill when ________.

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

A loss on impairment of an indefinite-life intangible asset is the difference between the asset's ________.

When an asset is impaired,the firm reduces the asset's carrying value on the balance sheet and recognizes the decline in value ________.

List the four key steps related to accounting for impairments of long-term operating assets.