SECTION A

Under IAS 36 Impairment of Assets, which of the following is an internal indicator of impairment?

Answer options:

A significant decline in the asset's market value.

Adverse changes in the technological, market, economic or legal environment.

Evidence of obsolescence or physical damage of an asset.

An increase in market interest rates.

How to approach this question

Distinguish between factors that occur outside the entity (external) and those that occur within the entity's operations or to the physical asset itself (internal).

Full Answer

C.Evidence of obsolescence or physical damage of an asset.✓ Correct

IAS 36 categorizes impairment indicators into external and internal sources. External sources include market value declines, negative changes in technology/markets/laws, and increases in interest rates. Internal sources include evidence of obsolescence or physical damage, changes in asset use (e.g., restructuring), and internal reports showing economic performance is worse than expected.

Common mistakes

Confusing market-driven obsolescence (external) with physical obsolescence/damage (internal).

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Practice the full ACCA FR — Financial Reporting Practice Exam 1

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