Asked by Erica Doherty on Jul 11, 2024
Verified
In relation to the reversal of an impairment loss of an individual asset, which of the following is incorrect?
A) When reversing an impairment loss, the carrying amount cannot be increased to an amount in excess of the carrying amount that would have been determined had no impairment loss been recognised.
B) Where the recoverable amount is less than the carrying amount of an individual asset, the reversal of a previous impairment loss requires adjusting the carrying amount of the asset to recoverable amount.
C) For a depreciable asset, there needs to be a calculation of carrying amount using the depreciation variables applied before the impairment loss to determine what the carrying amount would have been if there had been no impairment loss.
D) If the individual asset is recorded under the cost model, then the increase in the carrying amount is recognised immediately in profit or loss.
Reversal
The process of undoing or nullifying a previous accounting entry or transaction.
Impairment Loss
The difference when the recorded value of an asset or a cash-producing entity surpasses the amount it can be recovered for.
Depreciable Asset
An asset that loses value over time due to wear and tear, obsolescence, or age, and for which depreciation can be applied.
- Identify and rectify incorrect statements regarding the reversal of impairment losses.
Verified Answer
Learning Objectives
- Identify and rectify incorrect statements regarding the reversal of impairment losses.
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