IAS 36 How Impairment test

IAS 36 How Impairment test is all about this – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps: IAS 36 How Impairment test

  • What?? – Determining the scope and structure of the impairment review, explained here,
  • If and when? – Determining if and when a quantitative impairment test is necessary, explained here,
  • IAS 36 How Impairment test or understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary. Which is explained in this section…

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not … Read more

IAS 36 Determine if and when to test for impairment

IAS 36 Determine if and when to test for impairment – When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps:

  • What?? – Determining the scope and structure of the impairment review (see the step-by-step IAS 36 impairment approach),
  • If and when? – Determining if and when a quantitative impairment test is necessary (discussed on this page),
  • How? – Understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary (see IAS 36 Impairment test – How?).

Step 3: IAS 36 Determine if and when to test for impairment

IAS 36 requires an entity to a perform a quantified … Read more

The step-by-step IAS 36 impairment approach

When looking at the step-by-step IAS 36 impairment approach it comes down to the following broadly organised steps:

  • What?? – Determining the scope and structure of the impairment review,
  • If and when? – Determining if and when a quantitative impairment test is necessary, jump to this part here
  • How? – Understanding the mechanics of the impairment test and how to recognise or reverse any impairment loss, if necessary, jump to this part here.

The objective of IAS 36 Impairment of assets is to outline the procedures that an entity applies to ensure that its assets’ carrying values are not stated above their recoverable amounts (the amounts to be recovered through use or sale of the assets). To accomplish this … Read more

IAS 36 Best brilliant impairment of telecom assets

IAS 36 Best brilliant impairment of telecom assets sets out the procedures that an entity should follow to ensure that it carries its assets at no more than th IAS 36 Best brilliant impairment of telecom assets eir recoverable amount. Recoverable amount is the higher of the amount to be realised through using or selling the asset.

Where the carrying amount exceeds the recoverable amount, the asset is impaired and an impairment loss must be recognised.

The standard details the circumstances when an impairment loss should be reversed, and also sets out required disclosures for impaired assets, impairment losses, reversals of impairment losses as well as key estimates and assumptions used in measuring the recoverable amounts of cash-generating units (CGUs) that contain goodwill or intangible assets with indefinite … Read more

Recoverable amount

Recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.

Individual or collective assessment for impairment

Individual or collective assessment for impairment - An entity should normally identify significant increases in credit risk and recognise lifetime ECLs

Reversal of impairment losses

Reversal of impairment losses of a disposal group’s assets occurs when an asset held for sale is impaired but then revalues, as follows:

Fair value less costs to sell of assets held for sale may exceed the assets carrying amounts either at the initial classification date or on subsequent remeasurement under IFRS 5. In these circumstances, the entity may need to record a gain arising from the reversal of previous impairment losses but with the following conditions: Reversal of impairment losses

  • An impairment loss recorded under IAS 36 (prior to the held for sale classification) or under IFRS 5 (at or after the classification) has previously reduced the carrying amounts of the assets under review; Reversal of impairment losses
  • The potential gain does not
Read more

Impairment of intangible assets

Possible impairment of intangible assets has to be assessed on a periodical basis. Intangible assets are tested for impairment when there is indication that they might be impaired. Indicators of impairment include legal restrictions, business restructuring, development of new technology, economic changes, etc. Impairment of intangible assets

Impairment test for intangible assets is the same as that for a tangible fixed asset:

  1. comparing the carrying amount of the asset, and Impairment of intangible assets
  2. the higher of fair value (less cost to sell) and value in use. Impairment of intangible assets

If b) is lower than a) that difference is recognized as impairment. Impairment of intangible assets

Impairment test for goodwill is a little more complex. The goodwill is first … Read more

What about impairment of goodwill

What about impairment of goodwill – Goodwill must be tested annually for impairment in accordance with IAS 36 10(b). Goodwill must be allocated to one or more CGUs for the purpose of impairment testing because it does not generate independent cash inflows. Goodwill is commonly allocated to groups of CGUs for the purpose of impairment testing.

In accordance with IAS 36 80, goodwill is allocated to the CGUs that are expected to benefit from the synergies of the combination, both existing and acquired CGUs. The group of CGUs to which goodwill is allocated shall represent the lowest level at which the goodwill will be monitored and managed. The group of CGUs cannot be larger than an operating segment as … Read more

Impairment Example

Impairment Example – Accounting example

Impairment of property, plant and equipment, intangible assets, and goodwill

The group assesses assets or groups of assets, called cash-generating units (CGUs), for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or CGU may not be recoverable; for example, changes in the group’s business plans, changes in the group’s assumptions about commodity prices, low plant utilization, evidence of physical damage or, for oil and gas assets, significant downward revisions of estimated reserves or increases in estimated future development expenditure or decommissioning costs. If any such indication of impairment exists, the group makes an estimate of the asset’s or CGU’s recoverable amount. Individual assets are grouped into CGUs … Read more