AS 36 Impairment of Assets prescribes the procedures that should ensure that assets are included in a statement of financial position at no more than their recoverable amounts. Where an asset is carried at an amount in excess of its recoverable amount, it is said to be impaired and IAS 36 requires an impairment loss to be recognised. Required:(i) Define an impairment loss explaining the relevance of fair value less costs of disposal and value in use, and state how frequently assets should be tested for impairment. (5 marks)(ii) Explain how an impairment loss is accounted for. (4 marks)(b) Wilderness owns and operates an item of plant that cost $640,000 and had accumulated depreciation of $400,000 at 1 October 20X7. It is being depreciated at 12½% on cost. On 1 April 20X8 the plant was damaged when a factory vehicle collided into it. Due to the unavailability of replacement parts, it is not possible to repair the plant, but it still operates, albeit at a reduced capacity. Also it is expected that as a result of the damage the remaining life of the plant from the date of the damage will be only two years. Based on its reduced capacity, the estimated present value of the plant in use is $150,000. The plant has a current disposal value of $20,000 (which will be nil in two years’ time), but Wilderness has been offered a trade-in value of $180,000 against a replacement machine which has a cost of $1 million (there would be no disposal costs for the replaced plant). Wilderness is reluctant to replace the plant as it is worried about the long-term demand for the product produced by the plant. The trade-in value is only available if the plant is replaced. Required:Prepare extracts from the statement of financial position and statement of profit or loss of Wilderness in respect of the plant for the year ended 30 September 20X8. Your answer should explain how you arrived at your figures. (6 marks)

Which of the following statements regarding AASB 136 Impairment of Assets is MOST CORRECT?Group of answer choicesIts objective is to ensure assets are not carried at more than the amount recovered through use or sale of the asset.Impairment losses can never be reversed above the asset’s fair value.It allows financial statement preparers the choice of holding assets at recoverable amount instead of historical cost.Depreciation is calculated for an impaired asset based on its carrying amount as if no impairment loss was recorded.

As per AASB 136/IAS 36 Impairment of Assets, the recoverable amount test requires an entity to compare the fair value of an asset less costs to sell, with: Reading required            Learning objective 8.3 on page 224Group of answer choicesthe amount obtainable from the sale of the asset.its disposal value.its value in use.the costs directly attributable to the liquidation of the asset.

When an asset is measured using the cost model, an impairment loss is: Reading required            Learning objective 8.4 on page 226Group of answer choicesrecognised directly in equity.accumulated in a separate 'accumulated impairment losses' account.included in the balance of the accumulated depreciation and impairment losses account for that asset.set off against the balance of revenue.

Which of the following assets need to be tested for impairment every year?I. intangible assets with indefinite useful lives.II. intangible assets not yet available for use.III. intangible assets accounted for under the revaluation method.IV. goodwill acquired in a business combination. Reading required            Learning objective 8.2 on pages 221-222Group of answer choicesII, III and IV only.I, II and IV only.I, II and III only.I, III and IV only.

Noddy has a property included in its statement of financial position at a carrying amount of $2.75m. The property had been revalued during the year. If the property had not been revalued its carrying amount would only have been $1.25m. Following a fire, an impairment review of the property has been undertaken and it is estimated that its recoverable amount is only $1m. How much of the impairment loss should be recognised in other comprehensive income in accordance with IAS 36 Impairment of Assets? A.$1.75m B.$1.50m C.$0 D.$0.25m