AAA – L3 – SA – Q1.7 – Impairment

Incorrect statement about impairment.

Question

Which of the following statements is INCORRECT?

A Goodwill must be reviewed annually for impairment

B There is impairment when the recoverable amount is above the carrying amount

C The recoverable amount is the higher of fair value less costs to sell and value in use

D Value in use essentially involves discounted cash flow forecasts

Answer

Explanation:
Impairment occurs when the recoverable amount is below the carrying amount, making statement B incorrect. Statement A is correct, as goodwill must be reviewed annually for impairment. Statement C is correct, as the recoverable amount is the higher of fair value less costs to sell and value in use. Statement D is correct, as value in use involves discounted cash flow forecasts. Thus, B is the correct answer.

Tags: Goodwill, ICAG, Impairment, Recoverable Amount
Level: Level 3

Topic: Evaluation and review

Uploader: Salamat Hamid