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

Events after the Reporting period

When should a reporting entity recognise events after the reporting period in the financial statements that are being finalised?

What are the disclosures that should be given about the date when the financial statements were authorised for issue and about the events after the reporting date?

The answers look a bit colorful but are spot on and short……

The events

The three important terms were it is all about are:

1. Events after the reporting period:

are those events, favourable and unfavourable, that occur between the end of the reporting period and the date when the financial statements are authorised for issue. (IAS 10 3 Definitions)

2. Adjusting events:

are events occurring after the reporting date that provide Read more

3 powerful capital maintenance concepts

3 powerful capital maintenance concepts – There are three (or two a matter of definition) concepts of capital: a financial concept of capital (nominal maintenance and purchasing power maintenance) and a physical concept of capital. Under the financial concept, capital is defined as the net assets or equity of the enterprise, while under the physical concept, capital is defined as the productive capacity of the enterprise expressed in some physical units of measurement, as for example units of output per day.

The selection of the appropriate concept of capital by an enterprise should be based on the needs of the users of its financial statements. So, the financial concept of capital should be and mostly is used by the financial … Read more

Inventories the highlights

Inventories the highlights as it says provides a high level summary of the accounting and financial reporting in respect of inventory.

See Inventories for IFRS for Small and Medium-sized entities, the complete IAS 2 Inventories standards is also available.

Inventory is also called stock in trade, or just stock. Inventories the highlights


Applies to all inventories except:

  • work in progress on construction and service contracts (IAS 11);
  • financial instruments (IAS 32 and IFRS 9); and
  • biological assets arising from agricultural activity (IAS 41).

Does not apply to the measurement of inventories held by:

  • producers of agricultural and forest products, and minerals and mineral products, that are measured at net realisable value in accordance with well-established practices in those industries;
Read more

IFRS Measurement requirements

IFRS Measurement requirements – The Standards in International Financial Reporting Standards (IFRS) are one collection of financial reporting practices. They stay important because of the growing number of companies around the world (especially listed companies) that are required to comply with them, and the growing number of countries, that continue to model their own more general financial reporting requirements on them.

IFRS incorporates and builds on the accumulated, often inconsistent practical solutions devised by national standard-setters to deal with financial reporting problems that have emerged over many years, solutions which are in turn built on the accumulated business practices of centuries. IFRS is not a completely new and uniform approach to financial reporting, but the outcome of a long and … Read more

Realisable value measurement

Realisable value measurement – An asset’s realisable value is the amount for which it could be sold, and a liability’s realisable value is the amount for which it could be settled. Realisable value measurements are often made on a net basis, and here realisable value will be considered in the sense of net realisable value; that is, net of selling costs (for assets) and grossed up for settlement costs (for liabilities). As the actual use of realisable value is limited, it is difficult to say exactly how it would be calculated in practice if it were applied to assets and liabilities generally.

The view could be taken that, in substance, realisable value and fair value are the same except that … Read more

Historical cost measurement

Historical cost measurement – The historical cost of an asset is the amount paid for it and the historical cost of a liability is the amount received in respect of it or the amount expected to be paid to satisfy it.

Historical cost accounting is interpreted to require that the amount at which an asset is stated in the accounts should not exceed the amount expected to be recovered from either its use or its sale (its recoverable amount). Historical cost as it is understood is therefore recoverable historical cost.

Recoverable amount is usually considered to be the higher of an asset’s realisable value and its value in use. The resulting recoverable historical cost tree for determining an asset’s recoverable Read more

Value to the business measurement

Value to the business measurement – For any given asset, the value to the business (current costs) basis of measurement tries to answer the question:

How much worse off would the business be if it were deprived of it?

The answer, as a rule, is given by the asset’s replacement cost. For a liability, value to the business measures how much better off the business would be if it were relieved of it. Value to the business measurement

Because there are markets for only a proportion of the assets held by companies in the age and condition in which they exist at the balance sheet date, there is often no price available for a comparable replacement asset. For this reason, … Read more