IFRS and GAAP differ in the application of the fair value concept for impairment tests applied to intangible assets.Required:Describe the fair value concept as it is applied for impairment tests in IFRS and GAAP, highlighting the differences.
What will be an ideal response?
As a measure of fair value, GAAP uses the amount at which the asset could be sold in a current transaction between market participants. IFRS calculate the fair value in two ways and then require use of the higher of the two estimates. The first approach is a net realizable approach, using the fair value less costs to sell. The alternative IFRS approach is to value in use which is the present value of expected future cash flows. While the first approach of the IFRS is a disposal value approach similar to GAAP, the value-in-use approach is not contemplated in GAAP.
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