IAS 36 Objective Scope Definitions

IAS 36 Impairment of assetsIAS 36 Objective Scope Definitions

IAS 36 Objective Scope Definitions

Objective

1 The objective of this Standard 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.

Scope

2 This Standard shall be applied in accounting for the impairment of all assets, other than:

  1. inventories (see IAS 2 Inventories);
  2. contract assets and assets arising from costs to obtain or fulfil a contract that are recognised in accordance with IFRS 15 Revenue from Contracts with Customers;
  3. deferred tax assets (see IAS 12 Income Taxes);
  4. assets arising from employee benefits (see IAS 19 Employee Benefits);
  5. financial assets that are within the scope of IFRS 9 Financial Instruments;
  6. investment property that is measured at fair value (see IAS 40 Investment Property);
  7. biological assets related to agricultural activity within the scope of IAS 41 Agriculture that are measured at fair value less costs to sell;
  8. contracts within the scope of IFRS 17 Insurance Contracts that are assets; and
  9. non-current assets (or disposal groups) classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

3 This Standard does not apply to inventories, assets arising from construction contracts, deferred tax assets, assets arising from employee benefits, or assets classified as held for sale (or included in a disposal group that is classified as held for sale) because existing IFRSs applicable to these assets contain requirements for recognising and measuring these assets.

4 This Standard applies to financial assets classified as:

  1. subsidiaries, as defined in IFRS 10 Consolidated Financial Statements;
  2. associates, as defined in IAS 28 Investments in Associates and Joint Ventures; and
  3. joint ventures, as defined in IFRS 11 Joint Arrangements.

For impairment of other financial assets, refer to IFRS 9.

5 This Standard does not apply to financial assets within the scope of IFRS 9, investment property measured at fair value within the scope of IAS 40, or biological assets related to agricultural activity measured at fair value less costs to sell within the scope of IAS 41.

However, this Standard applies to assets that are carried at revalued amount (ie fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses) in accordance with other IFRSs, such as the revaluation model in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets. The only difference between an asset’s fair value and its fair value less costs of disposal is the direct incremental costs attributable to the disposal of the asset.

  1. If the disposal costs are negligible, the recoverable amount of the revalued asset is necessarily close to, or greater than, its revalued amount. In this case, after the revaluation requirements have been applied, it is unlikely that the revalued asset is impaired and recoverable amount need not be estimated.
  2. [deleted]
  3. If the disposal costs are not negligible, the fair value less costs of disposal of the revalued asset is necessarily less than its fair value. Therefore, the revalued asset will be impaired if its value in use is less than its revalued amount. In this case, after the revaluation requirements have been applied, an entity applies this Standard to determine whether the asset may be impaired.

Definitions

6 The following terms are used in this Standard with the meanings specified:

Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash-generating unit under review and other cash-generating units.

Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.

Depreciable amount is the cost of an asset, or other amount substituted for cost in the financial statements, less its residual value.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life1.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See IFRS 13 Fair Value Measurement.)

An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use.

Useful life is either:

  1. the period of time over which an asset is expected to be used by the entity; or
  2. the number of production or similar units expected to be obtained from the asset by the entity.

Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.

Next

Source EU rules on financial information disclosed by companies

 

Excerpts from IFRS Standards come from the Official Journal of the European Union (© European Union, https://eur-lex.europa.eu). Individual jurisdictions around the world may require or permit the use of (locally authorised and/or amended) IFRS Standards for all or some publicly listed companies.  The information provided on this website is for general information and educational purposes only and should not be used as a substitute for professional advice. The specific status of IFRS Standards should be checked in each individual jurisdiction. Use at your own risk. Annualreporting is an independent website and it is not affiliated with, endorsed by, or in any other way associated with the IFRS Foundation. For official information concerning IFRS Standards, visit IFRS.org or the local representative in your jurisdiction.

IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions IAS 36 Objective Scope Definitions