Summary
Summary Impairment IAS 36
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Brief summary of impairment on assets and financial instruments
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Impairment Description
Amount by which carrying amount exceeds the
recoverable amount
The recoverable amount is the higher of value in use and fair value (less costs
to dispose)
Costs to dispose of the asset do not include interest or income tax
Loss is limited to carrying amount of an asset
Identification
Ensures that assets are not overstated
Where an individual asset does not have a flow of economic benefits the group
of assets should be test
When to test?
When there is an indication of impairment (in an assessment situation a
scenario regarding the asset will be given which will lead you to test for
impairment)
Certain assets must be tested every year for impairment
Intangibles with infinite useful life
Intangibles still in the process of being completed
Goodwill
Measurement of the recoverable amount
Fair value less costs to sell:
The value is the price in an arm’s length transaction
Costs of disposal are costs required to bring asset into a saleable
condition
Value in use
PV of future cash flows (TVM calculation)
Recognition
Expenses unless revaluation impairment
Reversal of impairment
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