Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduc

Question

3 years ago

6

Buerhle Company needs to determine if its indefinite-life intangibles other than goodwill have been impaired and should be reduc

ed or written off on its balance sheet. The impairment test(s) to be used is (are):A. Both recoverability test and fair value testB. Recoverability test but not fair value testC. Not recoverability test but fair value testD. Neither recoverability test nor fair value test

Business

1 answer:

Vera_Pavlovna [14] · Answer 1 · 2022-05-07T19:59:15+03:00

Answer:

Option C Not recoverability test but fair value test

Explanation:

The reason is that the standard on impairment IAS 36 Impairment of Assets says that the assets with indefinite life must tested for impairment every accounting year end. The test only includes whether the fair value of the asset has been decreased or not. This test is helpful by asking questions that asks about the decrease in the life of the asset due to a new legislation, the performance of the asset is fallen (oil is less extracted now than before because the oil is not reachable), etc. The standard does not permits to use Recoverability test as it will come later once the company is sure that the asset fair value has been decreased.