CAF-1 · Chapter 5 · Question 2 of 15
When calculating the 'value in use' of an asset for impairment testing, which discount rate should be applied to future cash flows?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) A pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Explanation
IAS 36 requires that the discount rate used to calculate value in use be a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which future cash flow estimates have not been adjusted.
More IAS 36 Impairment of Assets MCQs
- Q4Under IAS 36, when is an asset considered to be impaired?
- Q5Which of the following is defined as the 'value in use' of an asset?
- Q6Which of the following assets is OUTSIDE the scope of IAS 36 Impairment of Assets?
- Q7Which of the following represents an INTERNAL indication that an asset may be impaired?
- Q8Which of the following represents an EXTERNAL indication of potential impairment?