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msod1273
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Posted: 05 Apr 2012 at 03:14 \| IP Logged

Lawson Corp. uses the cost model for intangible assets. On March 1, 2010, Lawson acquired intangible assets with an indefinite life for $100,000. On December 31, 2010, it was determined that the recoverable amount for these intangible assets was $90,000. On December 31, 2011, it was determined that the intangible assets had a recoverable amount of $94,000. What is the impairment gain or loss recognized in 2010 and 2011 on the income statement?

	2010	2011
a.	$10,000 loss	$6,000 loss
b.	$10,000 loss	$4,000 gain
c.	$10,000 loss	$0
d.	$0	$0

The answer is B as per Wiley.

According to me this question is based on revaluation model than cost model. Please verify the difference between revaluation and cost model under IFRS for intangible assets.

audreyP
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Posted: 05 Apr 2012 at 07:52 \| IP Logged

In summary, the key differences are:
1. Impairment test is required at report date while revaluation is not
required annually.
2. Loss and gain are reported on the income statement for impairment
wile as OCI for revaluation, which later, will be transferred to retained
earnings after disposing.
3. Write down amount is the same, however, the amount of write up for
recovery from impairment is limited to the loss previously recognized,
while the amount of write up for revaluation is not limited.
Hope it helps.

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Khan_Windsor
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Posted: 05 Apr 2012 at 11:54 \| IP Logged

oh man, i thought once you have a loss, you are not allowed to recover? or was this rule for something else? Please explain
I am assuming this question is for GAAP, not IFRS?

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msod1273
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Posted: 05 Apr 2012 at 12:51 \| IP Logged

Audrey P:

Thanks for the answer. I think it is very important to read what the question is asking for. I was mixing the revaluation gains and losses with impairment gains and losses.

If you are studying from the Becker can you point where is it mentioned that impairment loss is calculated using cost method.

audreyP
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Posted: 05 Apr 2012 at 20:22 \| IP Logged

Khan_Windsor wrote:

oh man, i thought once you have a loss, you
are not allowed to recover? or was this rule for something else? Please
explainI am assuming this question is for GAAP, not IFRS?

I think this question is for IFRS.
Only IFRS has cost model and revaluation model.

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