IAS 36 requires an impairment test for which of the following events or changes in circumstances: I. Reassessment of the useful life of tradenames from indefinite to 15 years II. Decrease in market interest rates which may affect the discount rate used III. Minor decline in budgeted revenue and operating income, flowing from the equipment IV. Cash flows for maintaining the equipment is higher than originally budgeted
A. I and II
B. III and IV
C. I and IV
D. II and III
A. IAS 36 requires an impairment test to be performed if there are indicators of impairment, such as a significant or prolonged decline in the fair value of an asset below its carrying amount. According to the reference terms provided:
- A change in the useful life of an asset, like reclassifying the useful life of tradenames from indefinite to 15 years (I), would require an impairment test.
- A decrease in market interest rates, which could impact the discount rate used in the calculation of the asset's recoverable amount (II), also necessitates an impairment test.
On the other hand, minor declines in budgeted revenue and operating income (III) and increased cash flows for maintaining the equipment (IV) are not necessarily direct indicators of impairment under IAS 36. These could be part of normal business fluctuations and might not always indicate a significant decrease in the asset's value.
Therefore, the correct answer is: A. I and II
