What does IAS36 deal with?
Impairment of assets or cash generating units
What is a cash generating unit?
The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets/ group of assets
What is the recoverable amount?
The higher of the fair value less costs of disposal and value in use
What is an impairment loss?
The amount by which the carrying amount of an asset exceeds the recoverable amount
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What assets does IAS36 not apply to?
- Inventories
- Construction contracts
- Deferred tax assets
- Assets from employee benefits
- Investment property
- Assets held for sale
Give 3 examples of identifying when an asset may be impaired (external sources)
- decline in market value
- changes in the legal economic or technological market
- market interest rate
Give 3 examples of identifying when an asset may be impaired (internal sources)
- obsolescence /physical damage
- reorganisation/discontinuation/sale of an asset
- assets performance is worse than expected
Where do we recognise an impairment loss?
- In the SPLOCI-P/l
Or - for a previously revalued asset it is recognised as a revaluation decrease, deducted from the revaluation surplus
Name the 3 steps when recognising impairment losses for CGU’s
- first reduce the value of goodwill
- reduce the CV of other assets in the CGU on a pro rata basis
- cv of an asset not reduced below: FVLCD, VIU or zero
When reversing an impairment loss what should the carrying amount be increased to?
The recoverable amount
When reversing what is one thing that is NEVER reversed?
Goodwill
