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

IFRS 7 Comprehensive Risk disclosures

IFRS 7 Comprehensive Risk disclosures – Management should disclose information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the end of the reporting period [IFRS 7 31]. IFRS 7 Comprehensive Risk disclosures

IFRS 7 requires certain disclosures to be presented by category of an instrument based on the IFRS 9 recognition and measurement categories of financial instruments (previously the IAS 39 measurement categories). IFRS 7 Comprehensive Risk disclosures

Certain other disclosures are required by class of financial instrument. For those disclosures an entity must group its financial instruments into classes of similar instruments as appropriate to the nature of the … Read more

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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Acquisition of investment properties

Acquisition of investment properties – When should a purchase of investment property (or properties) be accounted for as a business combination, and when as a simple asset purchase? This is an important issue because the IFRS accounting requirements for a business combination are very different from asset purchases. Acquisition of investment properties

The purchase of investment property (or properties) is a business combination if the acquired set of assets and activities meets IFRS 3’s definition of a business

(IFRS 3 Appendix A and supporting guidance). That guidance explains that a business consists of ‘inputs’ and ‘processes’ applied to those inputs that together have the ability to create ‘outputs’ (IFRS 3.B7). Determining whether a purchase of investment … Read more

Cash-generating unit (CGU)

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

Assessing information quality for measurement

Assessing information quality for measurement – The Conceptual Framework provides the foundation for Standards and Accounting Guidelines that:

  1. contribute to transparency by enhancing the comparability and quality of financial information, enabling investors and other market participants to make informed economic decisions.
  2. strengthen accountability by reducing the information gap between the providers of capital and the people to whom they have entrusted their money. Standards and Accounting Guidelines based on the Conceptual Framework provide information needed to hold management to account. As a source of comparable information, those Standards and Accounting Guidelines are also of vital importance to regulators.
  3. contribute to economic efficiency by helping investors to identify opportunities and risks, thus improving capital allocation. For businesses, the use of a
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