- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 3. Derecognition of Assets
CFA Practice Question
Long-lived assets to be disposed of by a sale continue to be ______.
II. tested for impairment as required
I. depreciated
II. tested for impairment as required
Correct Answer: Neither is true.
Such an asset will be recorded at the lower of its carrying value or fair value less the cost to sell.
User Contributed Comments 7
| User | Comment |
|---|---|
| johntan1979 | It says "to be disposed" means not yet disposed. I thought you need to continue depreciating the asset up till the date of disposal? For instance if disposed on June 30, then the depreciation is X 6/12 Unless, of course, we are to assume that "to be disposed" means the very next day :( |
| Creep | This question is ambiguous |
| Ifi2703 | Yes, i made the same assumption - i figured it meant they were held for sale but not yet sold, in which case you should continue depreciating/impairing until it is disposed of. |
| michaeloa3 | Once classified as Held for Sale it's no longer depreciated or amortized. |
| nabada0419 | I and II is correct for Held for use until "disposal". So none of them are correct for assets held for "sale". |
| Tom0409 | Once classified held for sale no longer depreciated or amortised, however under GAAP can be impairment loss can be reversed. |
| linzlinked | If the asset is classified as held-for-sale, it is no longer depreciated or amortised, but impairment test is needed, and the amount exceeding the NRV needs to be recorded as loss on P&L. So, II is right, but not I. |