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ACCA Applied Skills · Financial Reporting · Impairment of assets

Under IAS 36, which statement about reversing an impairment loss is correct?

An impairment loss on equipment can be reversed when estimates change, but the reversed carrying amount cannot exceed the depreciated amount that would have existed without the impairment. Goodwill impairment losses can never be reversed.

  1. AAn impairment loss on goodwill may be reversed if the recoverable amount recovers
  2. BAn impairment loss on equipment may be reversed, but the carrying amount after reversal must not exceed what it would have been without the impairmentCorrect
  3. CReversals of impairment losses on equipment are never allowed
  4. DA reversal on equipment may take its carrying amount up to the new recoverable amount even if this exceeds depreciated historical cost

Explanation

IAS 36 permits reversal for assets other than goodwill when estimates change, but the carrying amount is capped at the depreciated historical cost that would have applied had no impairment occurred. Goodwill impairment is never reversed. Allowing the carrying amount to rise to recoverable amount without a cap is incorrect.

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