SOLUTIONS

EXERCISE 1 – IMPAIRMENT TEST:

1) Impairment loss: € 640.000,00 (2.200,00 – 1.560,00)
Of this loss, 400.000,00 is used to eliminate the goodwill.
The remaining € 240.000,00 is split between the other two assets in the ratio 600:1.200
Development costs are reduced by 80.000, PPE by 160.000,00.
The carrying amounts are: 520.000,00 for development costs, 1.040,00 for PPE (a total of
1.560,00).

2) The carrying amount of PPE cannot be reduced to less than € 1.100,00.

So 60.000 of the impairment loss that would have been allocated to PPE must be allocated
instead to the development costs.
The carrying amounts are: 460.000,00 for development costs, 1.100,00 for PPE (a total of
1.560,00).

EXERCISE 2 – HARMONISATION PROCESS

For which Italian listed companies are IAS/IFRS mandatory in 2005? Please fill in the table
below, writing “Yes” (or “No”) if the company is obliged (or not) to issue 2005 Separate or
Consolidated Financial Statements according to IAS/IFRS.

Consolidated Separate
Financial Financial
Statements Statements
Listed companies. YES NO
Insurance companies. YES NO
Small companies (art. 2435 bis C.C.). NO NO
Companies with diffused financial instruments. YES NO
Companies consolidated by listed companies NO NO

EXERCISE 3 – REVALUATION MODEL

Carrying Depreciation Revaluation Devaluation Revaluation
amount of expense gain loss surplus
the building (income (income (income (balance
(balance statement) statement) statement) sheet)
sheet)
Dec. 31, X 324.000 36.000
Dec. 31, X+1 288.000 36.000
Dec. 31, X+2 210.000 30.000 48.000
Dec. 31, X+3 222.000 37.000 48.000 1.000

EXERCISE 4 – INTANGIBLE ASSETS

The € 180.000,00 is research expenditure and must be written off as an expense.

The €270.000,00 is development expenditure and must be capitalised as an intangible asset if all the
conditions listed in IAS 38 are satisfied. Otherwise, this amount must be also written off as an
expense.