Revaluations And Impairment Testing Of Non-current Assets

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Question 1
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True/False

If an asset's carrying amount is impaired,IAS 16 requires all assets in the same class to be revalued.

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Question 2
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If an asset is subject to depreciation or amortization there is no longer a need to test the asset for impairment.

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Question 3
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Depreciation method used and depreciation rates are required to be disclosed for taxation purposes.

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Question 4
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An entity that elects the revaluation model to measure a class of asset is permitted to revert back to the cost model provided that this will provide more relevant and reliable information.

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Question 5
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The revaluation model is a tool used by managers to reduce political costs.

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Question 6
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A sale of property plant and equipment requires the derecognition of the carrying amount of the asset and any cost of replacement part capitalised.

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Question 7
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Recoverable amount is the amount expected to be recovered through the ongoing use and subsequent disposal of an asset.

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Question 8
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The fair value of a non-current asset is defined in IAS 16 as the gross amount for which the asset can be sold when the entity is preparing to liquidate.

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Question 9
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Once an entity elects to value a class of assets using fair value it can switch back to cost basis measurement as long as there is justifiable reason.

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Question 10
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The process of discounting future cash flows in calculating the recoverable amount of an asset will result in a higher recoverable amount than if the cash flows are not discounted.

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Question 11
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Entities that elect to report plant and equipment at cost less accumulated depreciation are required to disclose a valuation of plant and equipment every 3 years in a note to the accounts.

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Question 12
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IAS 16 requires entities to review at least at the end of each annual reporting period to assess if the fair value of the non-current assets has changed.

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Question 13
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IAS 16 requires that if it has been decided to revalue a class of non-current assets,the valuations must be kept up to date.

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Question 14
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IAS 38 will permit some intangible assets to be revalued upwards only when there is an 'active market' for the asset.

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Question 15
Multiple Choice

A class of non-current assets as defined by IAS 116 is a category of non-current assets that:

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A
were all purchased at the same time by the reporting entity.
B
all have a similar nature or function in the operations of the entity.
C
are disclosed as a single item without supplementary dissection in the financial report.
D
all have a similar nature or function in the operations of the entity, and are disclosed as a single item without supplementary dissection in the financial report.
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Question 16
Multiple Choice

By permitting some classes of assets to be valued at cost and others at fair value the IASB has:

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A
removed any confusion regarding the total balance of non-current assets.
B
forced entities to accurately reflect their true financial position at any point in time.
C
created a situation where the total asset figure may be a combination of cost and fair value assessments, reducing its meaningfulness.
D
removed the opportunity for managers to act in their own self-interest as suggested by Positive Accounting Theory.
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Question 17
Multiple Choice

Purple Co Plc purchased an item of land 3 years ago at a cost of £700 000.Two years ago the recoverable value of the land was considered to be £550 000.In the current period the land is revalued and the fair value is now £750 000.What is the treatment of the change in value in each of the periods?

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A
Two years ago: a loss of £150 000 is recognised.The current period: a gain of £150 000 and an increase in the asset revaluation reserve of £50 000 is recognised.
B
Two years ago: £150 000 is debited to the asset revaluation reserve.The current period: £200 000 is credited to the asset revaluation reserve.
C
Two years ago: £150 000 is expensed in the period.The current period: £200 000 is transferred to the asset revaluation reserve.
D
Two years ago: £150 000 is written off to the asset revaluation reserve.The current period: £200 000 revenue is recognised.
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Question 18
Multiple Choice

IAS 16 provides guidance on fair values which states:

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A
Where an active and liquid market exists for an asset, the market price represents evidence of the asset's fair value.
B
Fair values are determined on the basis that an entity is a going concern.
C
Where no market exists the price should be based on the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
D
All of the given answers are correct.
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Question 19
Multiple Choice

Once a class of non-current assets has been revalued,IAS 16 requires that:

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A
Directors continue to revalue the class of assets on an ad hoc basis.
B
Revaluations must be undertaken regularly enough to ensure that the carrying amount of each asset in the class of assets does not differ materially from its fair value at reporting date.
C
All assets in the class must be revalued every 3 years.
D
Revaluations must be undertaken regularly enough to ensure that the carrying amount of the class of assets does not differ from its fair value at reporting date.
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Question 20
Multiple Choice

Where the value of revalued non-current assets does not change frequently and is not material,IAS 16 suggests that revaluations:

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A
may be undertaken when next convenient.
B
should be undertaken every 3 to 5 years.
C
may be undertaken for individual assets within a class.
D
should be suspended and the entity should switch back to cost.
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