All about MPSAS 21

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. How is the concern for impairment of assets for public sector assets different from those of profit oriented business enterprises?

  2. Non-cash generating assets are most likely -

  3. Under what kind of circumstances does a public sector entity will have to apply judgement to determine which standard (ie either MPSAS 21 or MPSAS 26) to apply for impairment?

  4. In 1984, the city of Petaling Jaya built an office building at a cost of RM60 million. The building was expected to provide service for 40 years. In 2003, after 19 years of use, fire caused severe structural problems. Due to safety reasons, the office building is closed, and structural repairs costing RM43.5 million are to be made to restore the office building to a usable condition. The replacement cost of a new office building is RM110 million. Under the Restoration Cost Approach, how much is the recoverable service amount?

  5. If an indication of impairment is detected for a public sector asset, what is the management required to do?

  6. If a public hospital has fifteen wards, twelve of which are used for fee-paying patients on a commercial basis, and the other is used for non-fee-paying patients. Patients from both wards jointly use other operating facilities of the hospital. The extent to which the asset is held with the objective of providing a commercial return needs to be considered to determine whether the entity should apply the provisions of MPSAS 21 or MPSAS 26. How should impairment (if any) be dealt with in this situation?

  7. In 1988, the Malacca City Council constructed a 20-story office building for use by the Council in Ayer Keroh at the cost of RM80 million. The building was expected to have a useful life of 40 years. In 2003, Occupational Health and Safety Regulations required that the top four stories of high rise buildings should be left unoccupied for the foreseeable future. The building has a fair value less costs to sell of RM45 million in 2003 after regulations came into force. The current replacement cost of a similar 20-story building is RM85 million. Impairment is indicated because the extent of use of the office building has changed from 20 floors to 16 floors as the result of the new regulations. Determine the impairment loss and what would be the most appropriate method used to determine that impairment loss amount?

  8. A non-cash-generating asset is impaired when the carrying amount of the asset exceeds its recoverable service amount. Which of the following IS NOT a key indication that an impairment loss may have occurred?

  9. In 1997, Kajang District constructed a primary school at a cost of RM15 million. The estimated useful life of the school is fifty years. In 2003 (after 6 years), the school is closed due to very poor enrolments due to shift of the population away. The school is converted to use as a storage warehouse, and the school district has no expectation that the building would be reopened for use as a school. The current replacement cost for a warehouse with the same storage capacity as the school is RM8.2 million. Under the Depreciated Replacement Cost approach, how much is the impairment loss that should be recognised?

  10. Under the Malaysian Public Sector Standards (MPSAS) framework, which accounting standard relating to impairment of assets relates to non-cash generating assets which is unique to public sector environment?