IAS 36 Impairment of assets

The objective of IAS 36 Impairment of assets is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures.

Example impairment and revaluation of a building

On January 1, 2005 OwnPlus Inc. purchased a building for €2 million. Its estimated useful life at that date was 20 years and the company uses the straight-line depreciation method. On December

31, 2009 the government embarked on a plan to construct a fly-over adjacent to the building and the related installation reduced the access to the building thereby decreasing the value of the building. The company estimated that it can sell the company for €1 million but it has to incur costs of €50,000. Alternatively, it if continues to use it the present value of the net cash flows the building will help in generating is €1.2 million.

The basic rule is to recognize impairment if carrying amount exceeds … Read more

What are the disclosure requirements for impairments?

The disclosure requirements are listed by class of assets, reportable segments, and other disclosures.

Disclosure by class of assets:

  • impairment losses recognised in profit or loss;
  • impairment losses reversed in profit or loss;
  • which line item(s) of the statement of comprehensive income; and
  • impairment losses on revalued assets recognised in other comprehensive income
  • impairment losses on revalued assets reversed in other comprehensive income.
Read more

Impairment of assets – Highlights

IAS 36 Impairment of assets applies to:

The standard requires an entity to recognise impairment when its assets are carried at more than their recoverable amount. The standard prescribes procedures that an entity has to apply to ensure assets are carried at no more than their recoverable amount as illustrated here.

Read more