Question

Please answer the following questions:

Select the correct option:

1. Acceptable depreciation methods under IFRS include

a.	Straight-line.
b.	Accelerated.
c.	Units-of-production.
d.	All of the above.

2. The activity method of depreciation

	a.	is a variable charge approach.
	b.	assumes that depreciation is a function of the passage of time.
	c.	conceptually associates cost in terms of input measures.
	d.	all of these.

3. In measuring an impairment loss, IFRS uses

a.	undiscounted cash flows
b.	discounted cash flows
c.	a fair value test.
d.	a replacement value test.

Answer True or False:

4. Under IFRS and U.S. GAAP, interest costs incurred during construction must be capitalized.

5. An accelerated depreciation method is appropriate when the asset's economic usefulness is the same each year.

6. IFRS permits the same depreciation methods as U.S. GAAP, with the exception of the units-of-production method, which is not allowed under IFRS.

7. As with U.S. GAAP, IFRS requires that both direct and indirect costs in self-constructed assets be capitalized.

Answer 1

1. d. all of the above

Explanation:

Three main depreciation methods that mentioned in the IFRS point IAS 16/ 62 are:

• Straight-line method
• Diminishing balance method(Accelerated depreciation method)
• Units of production method

2. a. is a variable charge approach

Explanation:The activity method of depreciation is also called the variable charge approach. It assumes that depreciation is a function of use or productivity instead of the passage of time. The life of the asset is considered in terms of either the output it provides (units of produces), or an input measure such as the number of hours it works. Conceptually, the proper cost association is established in terms of output instead of hours used, but often the output is not easily measurable.

3. c. Fair vaue test

Explanation: Under IFRS, a fair value test is used to measure impairment loss. The impairment test compares the asset's or (CGU's) carrying amount with its recoverable amount.

4. TRUE

5.FALSE

6. FALSE

Reason:As with U.S. GAAP, IGAAP requires that both direct and indirect costs in self-constructed assets be capitalized