ACCT 1A Lecture Notes - Lecture 7: Intangible Asset, Impaired Asset, Air Canada
Document Summary
Ifrs require that significant components of an item of ppe must be depreciated separately. For example, air canada buys airplanes and the plane, itself is depreciated over 20-25 years but the cabin and the interior equipment are depreciated over the lesser of 5 years or the remaining useful life of the plane. Impairment occurs when the carrying amount exceeds its recoverable amount. Recoverable amount is determined to be the higher of an asset"s fair value (less costs to sell) and its value in use. Value in use is the present value of estimated future cash flows expected to be earned from continuing use of an asset and from disposal at the end of its useful life. Impairment may be caused by many factors including obsolescence, physical damage and loss in market value. A company measures ppe at cost less any accumulated depreciation less any accumulated impairment losses. Another method a company can use to measure ppe is the revaluation method.
