- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 2. Impairment of Assets
CFA Practice Question
Under IFRS, recoverability is based on the comparison between ______ and ______.
II. fair value
III. undiscounted future cash flows
IV. discounted future cash flows
I. carrying value
II. fair value
III. undiscounted future cash flows
IV. discounted future cash flows
Correct Answer: I and the higher of II and IV
III is used under U.S. GAAP.
User Contributed Comments 7
| User | Comment |
|---|---|
| joywind | I thought that fair value should be more concisely expressed as fair value less cost of disposal |
| johntan1979 | Yes, joywind, I agree with you. The more precise answer would be (fair value - cost to sell) but I suppose II is right since you DO need fair value as part of the equation. |
| quanttrader | sucks we need to know both GAAP and IFRS - wouldn't just one do? |
| schweitzdm | Right though. As a chartered analyst we should be aware of how companies in other countries are doing things though. Especially if you are looking globally for value companies in today's market. |
| Tom0409 | Agree CFA Institute should remove GAAP, it doesn't make sense, why allow LIFO? |
| ashish100 | Because 'Merica thats why. *picture the bald eagle in your head coz this wont allow images |
| kingirm | Perfect summary |