Question

Park B: (4 marks) In setting up its systems to apply AASB 136 Impairment of Assets, management of Terry Ltd wants to know how often the company needs to apply an impairment test on its assets, and what information it needs to generate to determine whether a test is needed. Required Explain to the management: how often the company needs to apply an impairment test on its assets. (2 marks) what information it needs to generate to determine whether a test is needed. (2 marks)

Answer 1

Ans: i) As per IAS-36 "Impairment of Assets" every entity should perform impairment test on an annual basis on the goodwill and other intangible assets. Whereas in case of other assets the test to be performed when there is indication in the fall in the value of cash generating assets.

Indication here includes like fall in market value of similar assets or change in technology, management interest in discarding the asset etc.

Ans ii) information required to perform the test is as following:

1. Future cash generating capacity of the asset.

2. Current Market value of the asset or similar asset.

3. Management intention with regard to continuation of the asset.

4. Physical condition of the asset.

5. Discount rate to compute the present value of future cash flow from the asset to be tested.