1. IAS 36 applies to which of the following assets?(a) Inventories.(b) Financial assets.(c) Assets held for sale.(d) Property, plant, and equipment.Answer: (d)2. Value-in-use is(a) The market value.(b) The discounted present value of future cashflows arising from use of the asset and fromits disposal.(c) The higher of an assets fair value less costto sell and its market value.(d) The amount at which the asset is recognizedin the balance sheet.Answer: (b)3. If the fair value less costs to sell cannot be determined(a) The asset is not impaired.(b) The recoverable amount is the value-in-use.(c) The net realizable value is used.(d) The carrying value of the asset remains thesame.Answer: (b)4. If assets are to be disposed of(a) The recoverable amount is the fair value lesscosts to sell.(b) The recoverable amount is the value-in-use.(c) The asset is not impaired.(d) The recoverable amount is the carryingvalue.Answer: (a)5. Estimates of future cash flows normally wouldcover projections over a maximum of(a) Five years.(b) Ten years.(c) Fifteen years.(d) Twenty years.Answer: (a)6. An entity has a database that it purchased fiveyears ago. At that date, the database had 15,000 customeraddresses on it. Since the date of purchase,1,000 addresses have been taken from the list and2,000 addresses have been added to the list. It is anticipatedthat in two years time, a further 4,000 addresseswill have been added to the list. Indetermining the value-in-use of the customer lists,how many addresses should be taken into account atthe current date?(a) 15,000(b) 16,000(c) 20,000(d) 21,000Answer: (b)7. Which of the following is the best evidence of anassets fair value less costs to sell?(a) An asset that is trading in an active market.(b) The price in a binding sale agreement.(c) Information available that determines thedisposal value of the asset in an armslengthtransaction.(d) The carrying value of the asset.Answer: (b)8. When calculating the estimates of future cashflows, which of the following cash flows should notbe included?(a) Cash flows from disposal.(b) Income tax payments.(c) Cash flows from the sale of assets producedby the asset.(d) Cash outflows on the maintenance of the asset.Answer: (b)9. When deciding on the discount rate that shouldbe used, which factors should not be taken into account?(a) The time value of money.(b) Risks that relate to the asset for which futurecash flow estimates have not been adjusted.(c) Risks specific to the asset for which futurecash flow estimates have been adjusted.(d) Pretax rates.Answer: (c)10. An impairment loss that relates to an asset thathas been revalued should be recognized in(a) Profit or loss.(b) Revaluation reserve that relates to the revaluedasset.(c) Opening retained profits.(d) Any reserve in equity.Answer: (b)11. A cash-generating unit is(a) The smallest business segment.(b) Any grouping of assets that generates cashflows.(c) Any group of assets that is reported separatelyto management.(d) The smallest group of assets that generatesindependent cash flows from continuing use.Answer: (d)12. Goodwill should be tested for impairment(a) If there is an indication of impairment.(b) Annually.(c) Every five years.(d) On the acquisition of a subsidiary.Answer: (b)13. Where part of the cash-generating unit is disposedof, the goodwill associated with the elementdisposed of(a) Shall be written off to the income statemententirely.(b) Shall not be included in the calculation ofgain or loss on disposal.(c) Shall be included in the calculation of gainor loss on disposal.(d) Shall be written off against retained profits.Answer: (c)14. When impairment testing a cash-generating unit,any corporate assets, such as the head office businessor computer equipment, should(a) Be allocated on a reasonable and consistentbasis.(b) Be separately impairment tested.(c) Be included in the head office assets or parentsassets and impairment tested alongwith that cash-generating unit.(d) Not be allocated to cash-generating units.Answer: (a)15. When allocating an impairment loss, such a lossshould reduce the carrying amount of which assetfirst?(a) Property, plant, and equipment.(b) Intangible assets.(c) Goodwill.(d) Current assets.Answer: (c)16. Which of the following impairment losses shouldnever be reversed?(a) Loss on property, plant, and equipment.(b) Loss on goodwill.(c) Loss on a business segment.(d) Loss on inventory.Answer: (b)