Question

1. Describe the critical role of international perspectives in the application of accounting.

2. Discuss the need for the creation of uniform accounting standards of international application.

ABC Co. reported an impairment loss of $65,000 for the year ended December 31, 2019. At December 31, 2020, the asset’s recoverable amount increased by $90,000. The current book value is $100,000 less than it would have been if the asset had not been impaired. The recoverable amount doses not exceed the original book value as if the asset was not impaired.

answers this question please

1. Can ABC Co. record a recovery of previous loss for 2020? Explain.

Answer 1

Ans. No,

Explanation: You can reverse an impairment loss only when there is a change in the estimates used to determine the asset’s recoverable amount.

However, the increased carrying amount due to reversal should not be more than what the depreciated historical cost would have been if the impairment had not been recognized.

In the given case, ABC co. estimates that the asset’s recoverable amount increased by $90,000 during the year ended 31.12.2020. But at the same time current book value is $100,000 less than it would have been if the asset had not been impaired.

Hence, Previous impairment loss can not be reversed.