FRS 36

What is the primary objective of FRS 36?

• To prescribe the measurement of revenue

• To ensure assets are not carried at more than their carrying amount

• To determine the classification of assets

• To assess the fair value of financial instruments

What is the "recoverable amount" as defined by FRS 36?

• The greater of fair value less costs of disposal and value in use

• The lower of fair value less costs of disposal and value in use

• The historical cost of the asset

• The replacement cost of the asset

Which of the following assets are excluded from FRS 36?

• Investment in subsidiary

• Investment properties carried at fair value

• Goodwill

• Self-developed intangible assets

If an impairment loss is recognised, how should it be allocated within a CGU?

• Proportionally to all assets within the CGU

• First to goodwill, then to other assets on a pro-rata basis

• First to inventories, then to other assets

• Evenly across all assets

Which of the following is an example of internal indicator of impairment under FRS 36?

• Market interest rates increase

• Physical damage to an asset

• Decline in the market value of the asset

• Economic recession

Which discount rate should be used when calculating the value in use?

• The company's incremental borrowing rate

• The risk-free rate

• A rate reflecting current market assessment of the time value of money and the risks specific to the asset

• The company's weighted average cost of capital

Impairment testing for which of the following assets must be performed annually under FRS 36?

• Goodwill

• Intangible assets with finite useful lives

• Tangible assets with definite useful lives

• Financial assets

FRS 36 allows for the reversal of impairment losses for goodwill

• True

• False

The carrying amount of an asset can never exceed its recoverable amount under FRS 36.

• True

• False

Company A owns a plant that produces automotive parts. Due to a sudden downturn in the automotive industry, demand for its parts has decreased significantly.

The management has identified this as an internal indicator of impairment for the plant.

• True

• False

Answer explanation

It should be external indicator of impairment.