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

Leases

Lease - a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

Impairment of right-of-use assets

Impairment of right-of-use assets explains the lease assets now on the balance sheet and as a result also susceptible of impairment risks to be accounted for. Impairment of right-of-use assets

Right-of-use asset is an asset that represents a lessee’s right to use an underlying asset for the lease term. Impairment of right-of-use assets

Right-of-use

A contract conveys the right to control the use of an identified asset if the customer has both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset throughout the period of use/lease. Impairment of right-of-use assets

The right-of-use asset is depreciated over the lease term

  • The carrying
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Does a contract include a lease?

Does a contract include a lease? is a game like type of thing, walk through a few questions and you have decided whether a contract includes a lease or not.

As from 1 January 2019, the lessee is required to recognise almost all lease contracts on the balance sheet. The distinction between operating lease and finance lease has almost vanished.  The only optional exemptions are for certain short-term leases and leases of low-value assets.  Does a contract include a lease

IFRS 16 defines a lease as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

This walk through decision model may … Read more

Investment property

Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation

Non-current asset

A non-current asset is an asset that is not expected to turn to cash within one year of date shown on a company's statement of financial position

Executory contracts

Executory contracts are contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent. Hence an executory contract contains a combined right and obligation constituting a single asset or liability. The entity has an asset if the terms of the exchange are favorable; otherwise, it has a liability.

Examples of executory contracts (and some common reasons why they might be executory) include:

  • Real estate leases (tenant has to pay rent/landlord has to provide space) Executory contracts
  • Equipment leases (lessee has to pay rent/lessor has to provide equipment)
  • Development contracts (development work required/payment required on milestones), and
  • Licenses to intellectual property (licensee can use only within scope of license/licensor
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