CFA Practice Question

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CFA Practice Question

Long-lived assets to be disposed of by a sale continue to be ______.

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.
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