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

Environmental provision under IAS 37

Environmental provision under IAS 37 – Although there is no formal distinction between environmental and decommissioning provisions under IFRS, in general environmental provisions exclude provisions related to damage incurred in installing an asset (see decommissioning provisions).

In a dynamic economic and regulatory climate, bringing your future into focus can be a challenge. In the area of environmental accounting, this can prove to be an even more challenging proposition, given the inherent complexity of environmental liability reporting.

Moreover, companies should be aware that unexpected expenditures and accounting adjustments—like those arising from environmental obligations—can impact capital budgeting and future earnings. Companies have found that practices vary widely across sectors and both engineering and accounting expertise are critical in assessing environmental … Read more

IFRS 3 Recognising what you acquired in a business combination

IFRS 3 Recognising what you acquired in a business combination or recognizing and measuring the identifiable assets acquired, liabilities assumed, and any non-controlling interest in the acquiree.

IFRS 3 provides the following recognition principle for assets acquired, liabilities assumed, and any non controlling interest in the acquiree:

Excerpt from IFRS 3 10

As of the acquisition date, the acquirer shall recognize, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified in IFRS 3 11 and IFRS 3 12.

An acquirer should recognize the identifiable assets acquired and the liabilities assumed on the acquisition date if they … 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

Property plant and equipment Example

Property plant and equipment Example – Accounting policy example

Property plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation, if any, and, for assets that necessarily take a substantial period of time to get ready for their intended use, directly attributable finance costs.

The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the … Read more