- 6 Marks
CR – Apr 2022 – L3 – Q2a – Impairment of assets, IAS 36
Discuss the significance of three factors affecting impairment testing under IAS 36, including market capitalization and allocation of goodwill.
Question
An assessment of accounting practices for asset impairments is important in the context of financial reporting quality, especially during periods of economic uncertainty. The exercise of management judgment in impairment accounting is crucial. There are several factors that can influence the quality of impairment accounting and disclosures, including changes in circumstances, market capitalization, and the allocation of goodwill to cash-generating units.
Required:
Discuss the significance of the THREE (3) factors above when conducting an impairment test under IAS 36: Impairment of Assets.
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