In year 1, X Company recognized an impairment loss on the trade name for its beverage product, reducing the carrying value from $485,000 to $350,000. At December 31, year 3, while preparing its financial statements, X Company has determined that the fair value of the trade name has risen and it is now worth $500,000. What amount will be reported for the trade name on X Company's December 31, year 3 balance sheet?

Question

Business

Sky

7 April, 23:05

In year 1, X Company recognized an impairment loss on the trade name for its beverage product, reducing the carrying value from $485,000 to $350,000. At December 31, year 3, while preparing its financial statements, X Company has determined that the fair value of the trade name has risen and it is now worth $500,000. What amount will be reported for the trade name on X Company's December 31, year 3 balance sheet?

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Olsen · Answer 1

The value of the intangible will remain at $350,000

Explanation:

The reason is that the International Accounting Standard IAS-36 says that once the impairment is recognized for the intangible assets it can not be reversed which means that the amount reported would be $350,000. The reason is that it is very rare that the asset gain its value and specially those which are intangible assets. Most of the management in the 1990s-2000 tried to recognize a gain on impairment which was unjustifiable to increase their profits for the period so the standard specifically didn't permitted gain on a previously impaired asset.