Property, Plant, Equipment, Intangibles and Impairment

Introduction

Long-lived assets enable an entity to produce goods, deliver services, generate rental income and develop future capabilities. Their accounting is consequential because recognition, valuation, useful-life estimates and impairment judgments directly affect reported assets, profit and performance ratios.

This chapter applies the principal requirements of IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets, IAS 36 Impairment of Assets, IAS 40 Investment Property, IAS 23 Borrowing Costs and IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The emphasis is on recognition, measurement and professional judgment rather than mechanical bookkeeping alone.

Learning Objectives

After studying this chapter, students should be able to:

1. determine the initial cost of property, plant and equipment (PPE);
2. calculate depreciation using appropriate methods and component accounting;
3. account for subsequent expenditure, revaluation, derecognition and disposal;
4. distinguish research expenditure from qualifying development expenditure;
5. recognize and amortize finite-life intangible assets;
6. account for investment property under the cost and fair value models;
7. calculate impairment losses for individual assets and cash-generating units;
8. allocate and reverse impairment losses in accordance with IAS 36; and
9. evaluate the valuation, governance and ethical judgments involved.

1. Property, Plant and Equipment

1.1 Definition and recognition

PPE comprises tangible items that are held for production, supply, rental or administrative purposes and are expected to be used for more than one reporting period. Examples include buildings, machinery, vehicles, computer hardware and office equipment.

An item is recognized when:

• future economic benefits are probable; and
• its cost can be measured reliably.

Major spare parts and standby equipment are PPE when they satisfy the definition; otherwise, they are generally inventories.

1.2 Initial measurement

PPE is initially measured at cost. A general formulation is:

where:

• P = purchase price after trade discounts and rebates, including non-refundable taxes;
• D = directly attributable costs of bringing the asset to the location and condition necessary for operation;
• R = present value of the initial estimate of dismantling, removal and site-restoration obligations; and
• B = qualifying borrowing costs under IAS 23.

Directly attributable costs may include site preparation, delivery, installation, professional fees and testing costs. Proceeds from selling items produced before the asset reaches its intended condition are recognized in profit or loss, with their related costs, rather than deducted from PPE cost.

Training, advertising, general administration, start-up losses, abnormal waste and relocation costs are expensed unless another standard requires capitalization.

#### Worked example: acquisition cost

A manufacturer purchases equipment for CU500,000. Delivery costs CU20,000, installation CU30,000 and staff training CU10,000. The present value of the restoration obligation is CU40,000.

The CU10,000 training expenditure is expensed because it does not bring the equipment itself to the condition necessary for operation.

The initial restoration liability is recognized separately. Subsequent unwinding of the discount is normally a finance cost.

1.3 Subsequent expenditure and component accounting

Routine repairs and maintenance are expensed as incurred. A replacement or major inspection is capitalized when the recognition criteria are satisfied. The carrying amount of the replaced component or previous inspection is derecognized, even if it was not separately identified when acquired. Estimation may therefore be necessary.

Significant components with different useful lives or consumption patterns are depreciated separately. For an aircraft, the airframe, engines and major inspections may constitute separate components. Component accounting improves faithful representation but requires robust asset registers.

2. Depreciation

Depreciation systematically allocates an asset's depreciable amount over its useful life. It is not a valuation process and does not attempt to report fair value.

Under straight-line depreciation:

where:

• C = depreciable component's cost or revalued amount, in currency units;
• R = estimated residual value, in the same currency units; and
• n = useful life in years.

This formula assumes a constant consumption pattern and a full year of availability. Time apportionment is required for partial periods.

Other methods include:

• reducing balance, appropriate when benefits are consumed more heavily in earlier periods;
• units of production, based on output or usage; and
• other systematic methods reflecting the expected pattern of consumption.

A revenue-based method is generally inappropriate because revenue reflects factors other than asset consumption.

Depreciation begins when an asset is available for use—not necessarily when production starts. It generally continues while an asset is temporarily idle. It ceases at derecognition or when the asset is classified as held for sale, whichever occurs earlier.

Useful life, residual value and depreciation method are reviewed at least at each financial year-end. Changes are treated prospectively as changes in accounting estimates under IAS 8.

#### Component depreciation example

Equipment costing CU1,200,000 comprises an engine costing CU360,000 with a three-year life and other equipment costing CU840,000 with a six-year life and CU60,000 residual value.

Total annual depreciation is CU250,000, assuming both components are available throughout the year.

3. Subsequent Measurement of PPE

An entity chooses either the cost model or revaluation model as an accounting policy for an entire class of PPE.

3.1 Cost model

Under the cost model, PPE is carried at cost less accumulated depreciation and accumulated impairment losses.

3.2 Revaluation model

The revaluation model may be used when fair value can be measured reliably. Revaluations must be sufficiently regular to prevent material differences between carrying amount and fair value. The entire class, rather than selected favorable assets, must be revalued.

A revaluation increase is normally recognized in other comprehensive income (OCI) and accumulated in a revaluation surplus. However, it is recognized in profit or loss to the extent that it reverses a previous revaluation decrease recognized there.

A revaluation decrease is normally recognized in profit or loss. It is recognized in OCI to the extent of an existing revaluation surplus relating to that asset.

#### Worked example: revaluation sequence

An asset has a carrying amount of CU400,000 and is revalued to CU460,000. The CU60,000 increase is recognized in OCI, assuming no previous downward revaluation.

If the asset is subsequently revalued to CU350,000 and intervening depreciation is ignored solely to isolate the revaluation treatment, the CU110,000 decrease is allocated as follows:

• CU60,000 against the revaluation surplus in OCI; and
• CU50,000 as an expense in profit or loss.

A revaluation surplus may be transferred directly to retained earnings as the asset is used or on derecognition. Such transfers do not pass through profit or loss.

3.3 Carrying-amount reconciliation

A general reconciliation for an asset class may be represented as:

where:

• CA_c = closing carrying amount;
• CA_o = opening carrying amount;
• A = additions;
• BC = assets acquired through business combinations;
• T_i and T_o = transfers into and out of the class;
• RI = revaluation increases;
• RD = revaluation decreases;
• X = carrying amounts derecognized through disposals or retirements;
• Dep = depreciation or amortization expense;
• IL = impairment losses;
• IR = impairment reversals; and
• FX = the signed net effect of foreign-currency translation differences.

The reconciliation must include both revaluation increases and revaluation decreases. Depending on the entity's transactions, additional separately disclosed movements may be necessary.

4. Derecognition, Disposal and Held-for-Sale Classification

PPE is derecognized on disposal or when no future economic benefits are expected from use or disposal.

The gain or loss is recognized in profit or loss and is generally not presented as revenue.

An asset or disposal group is classified as held for sale under IFRS 5 when its carrying amount will be recovered principally through sale rather than continuing use. Among other requirements:

• the asset is available for immediate sale in its present condition;
• management is committed to a sale plan;
• an active program to locate a buyer has begun;
• the asset is actively marketed at a price reasonable in relation to current fair value;
• the sale is highly probable, normally within one year; and
• actions required to complete the plan indicate that significant changes or withdrawal are unlikely.

A held-for-sale asset is measured at the lower of carrying amount and fair value less costs to sell, and depreciation ceases. Specific exceptions to IFRS 5 measurement rules must be considered for assets governed by other standards.

5. Intangible Assets

5.1 Nature and recognition

An intangible asset is an identifiable non-monetary asset without physical substance. It is identifiable when it is separable or arises from contractual or other legal rights. Recognition also requires control, probable future economic benefits and reliable measurement of cost.

Examples include patents, licenses, copyrights, purchased software and certain qualifying development costs. Expenditure that merely creates business capability without an identifiable controlled resource is not an asset.

Separately acquired intangible assets are initially measured at cost. Intangibles acquired in a business combination are generally measured at acquisition-date fair value. Internally generated goodwill is not recognized because its cost cannot be distinguished reliably from the cost of developing the business as a whole.

5.2 Research and development

The distinction between research and development is central to IAS 38.

Research involves original investigation undertaken to obtain new knowledge. Research expenditure is expensed when incurred because an entity cannot yet demonstrate that an asset capable of generating probable benefits exists.

Development applies research findings to a plan or design for new or substantially improved products, processes or services before commercial production or use. Development expenditure is capitalized only from the date on which all six conditions are demonstrated:

1. technical feasibility of completion;
2. intention to complete and use or sell the asset;
3. ability to use or sell it;
4. probable future economic benefits, including a market or internal usefulness;
5. adequate technical, financial and other resources to complete development; and
6. ability to measure attributable expenditure reliably.

Expenditure incurred before the criteria are met remains an expense and cannot later be reinstated as an asset.

#### Worked example: development project

A financial technology company spends CU90,000 on research. It then incurs CU300,000 on development, of which CU120,000 is incurred before all capitalization criteria are demonstrated and CU180,000 afterward.

The accounting is:

• expense CU210,000: CU90,000 research plus CU120,000 pre-qualification development;
• capitalize CU180,000 as an intangible asset.

If the asset becomes available for use on 1 October, has a five-year life and no residual value, year-end amortization at 31 December is:

The year-end carrying amount is CU171,000.

5.3 Useful lives and amortization

A finite-life intangible is amortized systematically from the date it is available for use. Its method should reflect the consumption pattern; otherwise, straight-line amortization is used.

The residual value of a finite-life intangible is assumed to be zero unless:

• a third party has committed to purchase it at the end of its useful life; or
• an active market exists from which residual value can be determined and it is probable that the market will exist at the end of the asset's useful life.

An indefinite-life intangible is not amortized. “Indefinite” does not mean infinite; it means there is no foreseeable limit to the period over which net cash inflows are expected. Its useful-life assessment is reviewed annually, and it is tested for impairment annually and whenever impairment indicators arise.

The revaluation model for intangible assets is available only when fair value can be measured by reference to an active market. Such markets are uncommon for unique brands, patents and customer relationships.

5.4 Digital assets and cloud arrangements

Software may be a separate intangible asset or part of related hardware, depending on whether the hardware can operate without it. In cloud computing arrangements, the customer may receive a service rather than control software. Configuration and customization expenditure may therefore be expensed when services are received, recognized as a prepayment, or included in an intangible asset if the IAS 38 recognition requirements are independently met.

Internally generated brands, mastheads, publishing titles and customer lists are not recognized. Start-up, training and advertising expenditure is also generally expensed.

6. Investment Property

Investment property is land, a building, part of a building, or both, held to earn rentals, for capital appreciation, or both. It differs from:

• owner-occupied property, accounted for under IAS 16; and
• property held for sale in the ordinary course of business, accounted for under IAS 2.

If portions could be sold or leased separately, they are accounted for separately. If not, a property is investment property only when the owner-occupied portion is insignificant.

Investment property is initially measured at cost, including transaction costs. Subsequently, an entity generally selects one model consistently:

Under the fair value model, the absence of depreciation does not imply that the property is economically permanent. Changes in market value are recognized directly in profit or loss.

Transfers into or out of investment property occur only when there is an evidenced change in use, not merely because management changes its intention.

7. Impairment of Assets

7.1 Purpose and indicators

IAS 36 prevents assets from being carried above their recoverable amount. At each reporting date, an entity considers external and internal impairment indicators, such as:

• significant declines in market value;
• adverse technological, economic, legal or market changes;
• increases in market interest rates;
• market capitalization below net asset carrying amount;
• physical damage or obsolescence;
• restructuring, closure or underperformance; and
• actual cash flows materially below forecasts.

Goodwill, indefinite-life intangibles and intangibles not yet available for use must be tested annually and when indicators exist. Other assets are tested when an indicator exists.

7.2 Recoverable amount

Recoverable amount is the higher of:

where:

• RA = recoverable amount;
• VIU = value in use; and
• FVLCD = fair value less costs of disposal.

An impairment loss is:

where CA is carrying amount and IL is impairment loss, both in currency units.

Value in use is the present value of future cash flows expected from continuing use and ultimate disposal:

where:

• CF_t = estimated cash flow in period t;
• r = discount rate per period;
• n = explicit forecast horizon; and
• TV_n = terminal value at the end of period n.

Cash-flow and discount-rate assumptions must be internally consistent. IAS 36's traditional approach uses a pre-tax discount rate reflecting current market assessments of the time value of money and asset-specific risks not already reflected in cash flows. Cash flows exclude financing, income taxes, uncommitted future restructurings and improvements that enhance performance beyond the asset's current condition.

Figure: IAS 36 impairment assessment from testing trigger to loss recognition.

7.3 Cash-generating units

If an individual asset does not generate largely independent cash inflows, it is tested within a cash-generating unit (CGU), the smallest identifiable group generating substantially independent cash inflows. CGUs should be identified consistently unless a change is justified.

For a CGU, an impairment loss is allocated:

1. first, to reduce goodwill allocated to the CGU; and
2. then, pro rata to the other assets based on their carrying amounts.

However, no individual asset may be reduced below the highest of:

• its fair value less costs of disposal, if measurable;
• its value in use, if determinable; and
• zero.

Any amount prevented by this floor is reallocated among the other eligible assets, subject to the same constraint. Residual value is not part of this impairment-allocation floor.

#### Worked example: CGU allocation

A CGU contains goodwill of CU120,000, a building of CU600,000 and equipment of CU180,000. Its total carrying amount is CU900,000 and recoverable amount is CU700,000. The impairment loss is CU200,000.

Goodwill is first reduced by CU120,000. The remaining CU80,000 would ordinarily be allocated to the building and equipment in the ratio 600:180. However, assume the building's applicable IAS 36 floor is CU560,000, so it cannot be reduced by more than CU40,000. Assume the equipment's floor is CU130,000.

The allocation is therefore:

The building floor constrains its reduction; the balance is allocated to equipment without taking it below its own floor.

7.4 Recognition and reversal

An impairment loss is recognized in profit or loss unless the asset is carried at a revalued amount, in which case it is treated as a revaluation decrease to the extent required by the relevant standard.

At later reporting dates, entities assess whether impairment losses may have decreased. A reversal is recognized when recoverable amount has increased because the estimates used to determine it have changed.

For an asset other than goodwill, the post-reversal carrying amount cannot exceed the carrying amount that would have existed, net of depreciation or amortization, had no impairment been recognized. Impairment of goodwill is never reversed.

#### Worked example: reversal ceiling

An asset with a carrying amount of CU500,000 is impaired to CU380,000. At that date it has five years of remaining useful life and no residual value. During the next year, depreciation is CU76,000, leaving CU304,000.

At the next year-end, recoverable amount rises to CU430,000. Without the original impairment, depreciation would have been CU100,000, leaving a hypothetical carrying amount of CU400,000.

The reversal is limited to CU96,000, producing a carrying amount of CU400,000.

8. Integrated Illustrative Case: Meridian Financial Services

Background

Meridian Financial Services, a fictional entity, is preparing its year-end financial statements. It has acquired operational equipment, developed a digital lending platform and purchased a rental property.

Problem and analysis

Operational equipment: Meridian pays CU1,000,000, incurs CU40,000 delivery, CU60,000 installation and CU20,000 training, and recognizes a CU100,000 restoration obligation at present value. Recognized PPE cost is CU1,200,000; training of CU20,000 is expensed.

The equipment consists of an engine component of CU360,000 with a three-year life and another component of CU840,000 with a six-year life and CU60,000 residual value. Annual depreciation is CU250,000, as previously demonstrated.

Digital platform: Research expenditure is CU90,000. Development expenditure is CU300,000, but only CU180,000 is incurred after all IAS 38 criteria are demonstrated. Meridian expenses CU210,000 and capitalizes CU180,000. Three months' amortization is CU9,000, leaving CU171,000.

Rental property: The property costs CU800,000 plus CU20,000 transaction costs. It is held to earn rentals and qualifies as investment property. Meridian applies IAS 40's fair value model. At year-end, fair value is CU870,000.

The CU50,000 gain is recognized in profit or loss, and no depreciation is charged under the fair value model.

Approach and outcome

Meridian should maintain separate accounting records for PPE components, development phases and investment property. The year-end effects include:

• PPE of CU950,000 after CU250,000 depreciation;
• digital platform carrying amount of CU171,000;
• research and pre-qualification development expense of CU210,000;
• training expense of CU20,000; and
• investment property of CU870,000 with a CU50,000 fair value gain.

Learning points

The case demonstrates that assets with similar long-term benefits may follow substantially different measurement rules. Evidence supporting capitalization dates, component values, useful lives and fair values is as important as the calculations themselves.

9. Judgment, Governance and Contemporary Practice

9.1 Critical judgments and estimates

Material judgments include:

• whether expenditure creates a controlled asset;
• when an asset becomes available for use;
• whether development criteria are met and on what date;
• useful lives, residual values and consumption patterns;
• identification of CGUs and allocation of goodwill;
• cash-flow forecasts, growth rates and discount rates;
• fair-value inputs and restoration obligations; and
• whether a property is owner-occupied or held for investment.

These estimates are interdependent. For example, optimistic growth forecasts may increase value in use, while an understated discount rate also inflates value in use. Sensitivity analysis helps users understand estimation uncertainty.

9.2 Ethical and control issues

Capitalizing expenditure delays expense recognition and can increase current profit. Management incentives may therefore encourage premature capitalization, overstated useful lives or delayed impairment. Effective governance includes:

• capitalization policies approved by those charged with governance;
• project-stage documentation and authorization controls;
• independent review of valuations and impairment models;
• reconciliation of asset registers to the general ledger;
• physical verification and cybersecurity controls over digital assets;
• back-testing forecasts against actual performance; and
• transparent disclosure of assumptions and sensitivities.

Valuation specialists can improve reliability, but management retains responsibility for financial statement judgments.

9.3 Technology, AI and emerging risks

Integrated asset-management systems can track locations, component lives, maintenance and depreciation. AI may identify impairment indicators from operational data or support forecasting, but model outputs require human validation. Weak data, hidden bias or unsupported terminal-growth assumptions can create precise-looking but unreliable valuations.

Climate transition, physical climate risk, rapid technological obsolescence and higher interest rates may shorten useful lives, increase restoration obligations, reduce cash-flow forecasts or raise discount rates. These effects must be incorporated when they affect reporting-date assumptions; they cannot be deferred merely because uncertainty remains.

Chapter Summary

PPE is initially measured at purchase price plus directly attributable, restoration and qualifying borrowing costs. Significant components are depreciated separately over useful lives that reflect expected consumption. Subsequent measurement follows either the cost model or, for an entire class with reliably measurable fair value, the revaluation model. Revaluation increases and decreases have asymmetric OCI and profit-or-loss treatment.

Research expenditure is expensed, while development expenditure is capitalized only after all IAS 38 criteria are demonstrably satisfied. Finite-life intangibles are amortized; indefinite-life intangibles are not amortized but require annual impairment testing. A non-zero intangible residual value is permitted only in the specified third-party commitment or qualifying active-market circumstances.

Investment property is distinguished by its rental or capital-appreciation purpose. Under IAS 40's fair value model, fair-value changes enter profit or loss and depreciation is not charged.

IAS 36 compares carrying amount with the higher of value in use and fair value less costs of disposal. CGU losses reduce goodwill first and then other assets, subject to the highest of each asset's measurable fair value less costs of disposal, determinable value in use and zero. Reversals are restricted to the hypothetical carrying amount absent impairment, and goodwill impairment is never reversed. Reliable accounting depends on documented judgments, sound valuation methods and strong governance.

Key Terms

Active market: A market with sufficiently homogeneous items, willing buyers and sellers normally available, and publicly available prices.

Available for use: The condition in which an asset can operate as intended by management.

Carrying amount: The amount at which an asset is recognized after accumulated depreciation or amortization and impairment.

Cash-generating unit: The smallest identifiable asset group generating largely independent cash inflows.

Component accounting: Separate depreciation of significant asset parts with different useful lives or consumption patterns.

Depreciable amount: Cost or substituted amount less residual value.

Depreciation: Systematic allocation of a tangible asset's depreciable amount over its useful life.

Development: Application of research findings to a plan or design before commercial production or use.

Fair value less costs of disposal: Fair value less incremental costs directly attributable to disposal.

Impairment loss: The excess of carrying amount over recoverable amount.

Indefinite useful life: A life for which no foreseeable limit exists to expected net cash inflows.

Intangible asset: An identifiable non-monetary asset without physical substance.

Investment property: Property held to earn rentals, for capital appreciation, or both.

Recoverable amount: The higher of value in use and fair value less costs of disposal.

Research: Original investigation undertaken to obtain new scientific or technical knowledge.

Residual value: Estimated amount obtainable from disposal after disposal costs, assuming the asset were already of the expected age and condition at the end of its useful life.

Revaluation surplus: Equity accumulation arising principally from qualifying upward revaluations recognized in OCI.

Useful life: The period or production units over which an asset is expected to be available for use.

Value in use: Present value of future cash flows expected from an asset or CGU.

Review Questions

Short Answer Questions

1. State the two general recognition criteria for PPE.
2. When does depreciation commence?
3. Why is research expenditure expensed under IAS 38?
4. Define recoverable amount under IAS 36.
5. How does the IAS 40 fair value model treat fair-value changes?

Long Answer Questions

1. Explain the components of PPE acquisition cost and distinguish them from expenditure recognized immediately in profit or loss.
2. Compare the cost and revaluation models under IAS 16, including the treatment of increases and decreases.
3. Explain the recognition, useful-life and amortization requirements for intangible assets.
4. Discuss the six conditions for capitalizing development expenditure and the evidence management should retain.
5. Explain how impairment losses and subsequent reversals are recognized for individual assets and CGUs.

Analytical / Application Questions

1. A company acquires a production line containing components with different useful lives. Design an appropriate componentization and depreciation approach and identify the information required.
2. Evaluate how an optimistic terminal-growth rate and a low discount rate could affect an impairment test and propose governance controls.
3. A mixed-use building contains offices used by the owner and floors leased to tenants. Analyze its classification under IAS 16 and IAS 40 under alternative separability assumptions.

Multiple Choice Questions with Answers

Question 1

Equipment has a purchase price of CU500,000, delivery of CU20,000, installation of CU30,000, training of CU10,000 and a restoration obligation with a present value of CU40,000. What is its initial PPE cost?

A. CU550,000

B. CU560,000

C. CU590,000

D. CU600,000

Correct Answer: C. CU590,000

Question 2

An asset costs CU590,000, has a CU50,000 residual value and a six-year useful life. Assuming straight-line depreciation and a full year of use, what is annual depreciation?

A. CU90,000

B. CU98,333

C. CU100,000

D. CU108,000

Correct Answer: A. CU90,000

Question 3

A revalued asset decreases by CU110,000. An existing revaluation surplus for that asset is CU60,000. How is the decrease recognized?

A. CU110,000 entirely in profit or loss

B. CU60,000 in OCI and CU50,000 in profit or loss

C. CU50,000 in OCI and CU60,000 in profit or loss

D. CU110,000 entirely in OCI

Correct Answer: B. CU60,000 in OCI and CU50,000 in profit or loss

Question 4

A project incurs CU90,000 research expenditure, CU120,000 development expenditure before IAS 38 criteria are met and CU180,000 afterward. What amount is capitalized?

A. CU90,000

B. CU180,000

C. CU300,000

D. CU390,000

Correct Answer: B. CU180,000

Question 5

An asset has a carrying amount of CU760,000, value in use of CU690,000 and fair value less costs of disposal of CU710,000. What impairment loss is recognized?

A. CU50,000

B. CU70,000

C. CU20,000

D. CU0

Correct Answer: A. CU50,000

Question 6

When allocating a CGU impairment loss to an asset other than goodwill, the asset cannot be reduced below the highest of which amounts?

A. Residual value, historical cost and zero

B. Fair value, value in use and residual value

C. Fair value less costs of disposal if measurable, value in use if determinable, and zero

D. Replacement cost, selling price and zero

Correct Answer: C. Fair value less costs of disposal if measurable, value in use if determinable, and zero

Question 7

Under IAS 40's fair value model, how is an investment property's annual fair-value increase normally treated?

A. Recognized in profit or loss, with no depreciation charged

B. Recognized in OCI, with depreciation charged

C. Recognized directly in retained earnings

D. Deferred until the property is sold

Correct Answer: A. Recognized in profit or loss, with no depreciation charged

Question 8

When may a finite-life intangible asset have a non-zero residual value under IAS 38?

A. Whenever management expects inflation

B. Whenever useful life exceeds ten years

C. Only when management has an internal resale plan

D. When a third party has committed to purchase it or a qualifying active market exists and is expected to remain

Correct Answer: D. When a third party has committed to purchase it or a qualifying active market exists and is expected to remain

Question 9

Which item is required for an IFRS 5 held-for-sale classification?

A. The asset must already have been sold after year-end

B. The asset must be actively marketed at a price reasonable relative to current fair value

C. The asset must continue to be depreciated until legal title transfers

D. Management must intend to retain the asset for at least two years

Correct Answer: B. The asset must be actively marketed at a price reasonable relative to current fair value

Question 10

After impairment, an asset has a carrying amount of CU304,000. Its recoverable amount rises to CU430,000, but its hypothetical carrying amount without the prior impairment is CU400,000. What reversal is recognized?

A. CU126,000

B. CU30,000

C. CU96,000

D. CU0

Correct Answer: C. CU96,000