IAS 36 Impairment of Assets
International Accounting Standard 36
Overview of IAS 36
- Issued: in 1998; followed by amendments
- Effective date: 1 January 1999
- What it does:
- It defines key terms such as impairment loss, recoverable amount, cash-generating unit, corporate assets, etc.
- It also establishes procedures for identification that an asset might be impaired .
- For intangible assets with an indefinite useful life or not yet available for use, and for goodwill, impairment tests are required.
- IAS 36 sets rules for measuring recoverable amount being higher of asset’s or cash generating unit’s (CGU) fair value less costs to sell and its value in use.
- IAS 36 also prescribes how to measure and recognize an impairment loss in the financial statements.
- Cash-generating units and goodwill are separately considered with focus on identifying CGU, determination of recoverable amount and carrying amount of CGU, issues related to goodwill and corporate assets. Allocation of impairment loss for a cash generating unit is outlined.
- IAS 36 deals also with reversals of impairment loss for individual assets as well as for CGU.
- It prescribes a number of disclosures.
- Appendices provide further guidance on specific issues, such as measuring value in use, etc. IASB issued also illustrative examplesthat are not part of IAS 36.
Articles about IAS 36
- Summary of IAS 36 Impairment of Assets
- Impairment test under Covid-19 pandemic - the article brings up special considerations to take when performing impairment test in the pandemic situation
- How to Test Goodwill for Impairment - the article explains how to test goodwill for impairment and contains numerical example, too.
- How to Make Cash Flow Projections for Impairment Testing under IAS 36 - this article copes with the most common considerations and traps when making your cash flow projections for value in use calculation.
- Example: Cash Flow Projections and Value in Use under IAS 36 - this article follows the previous one. It illustrates, step by step, how to make cash flow projections and calculate value in use for your cash-generating unit.
- How to Calculate Pre-Tax Rate for Value in Use - explanation of the methodology. You can find the video in the bonus section.
- Top Excel Formulas for IFRS - learn how to ease your life with Excel, specifically with NPV formula applicable for IAS 36.
Questions and Answers
- Impairment and subsequent depreciation - Should we reverse a part of impairment to offset depreciation charge for next year or should we only adjust future depreciation charges?
- Can we avoid an impairment loss by the change in asset’s use?
- Testing goodwill for impairment - with short example
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