Summary Impairment IAS 36

Impairm
ent 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