Understanding Impairment of Investments in Associates

Medium Intercorporate Investments Impairment Of Investments

XYZ Corp. owns a 30% stake in ABC Ltd., which has been classified as an investment in associates. During the non-operating period, XYZ received a report indicating that the fair value of its investment had significantly decreased due to adverse market conditions, leading to concerns about ABC Ltd.'s recovery prospects. XYZ Corp. evaluated the situation and concluded that the carrying amount of its investment impaired and that an impairment loss should be recognized in its financial statements.

Which of the following statements is correct regarding the impairment of investments in associates under IFRS?

An impairment loss is recognized only if the recoverable amount is less than the investment's carrying amount.

An impairment loss must be reversed if the reasons for the impairment no longer exist.

Impacts on goodwill from impairment losses are recognized in the income statement immediately.

Hint

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