Impairment

Question 1

Indicators of impairment

Answer 1

Unable to recover carrying value (BV) of asset / CGU

• Damage to asset
• Market decline in value
• Not performing well
• SBU not performing as expected, not covering expenses

Question 2

Assets which require annual impairment testing

Answer 2

• Intangibles with indefinite useful life
• Intangibles not yet ready for use, not depreciated yet
• CGU’s which have goodwill allocated

Question 3

CGU

Answer 3

Cash generating unit. Small group of assets that generate cash flows together - IFRS

ASPE uses “asset groups” rather than CGU

Question 4

Impairment question steps

Answer 4

1. Determine if individual asset or CGU
2. Asses for impairment - are the indicators?
3. Compare carrying value to recoverable amount

Question 5

Recoverable amount for IFRS

Answer 5

higher of:
- Fair value - disposal costs i.e amount to sell now
- Value in use - Do PV on future cash flows & future sale amount.
PMT = estimated yearly cash flow
N = Years
I/Y = discount rate
FV = future sale price of asset

If carrying > recoverable write down to recoverable amount

Question 6

Impairment loss for IFRS

Answer 6

To NI

Carrying - Recoverable

Question 7

IFRS and ASPE sections for impairment

Answer 7

IAS 36 ASPE 3063

Question 8

Reversal of impairment

Answer 8

The asset is written up to the lesser of:

• Recoverable amount
• Carrying value that would have existed before the impairment

1. Calculate what carrying value would have been. Compare to the new recoverable amount
2. Calculate the carrying amount (account for depreciation)
3. Record write up based on lower of and current carrying value on books.

Recognize in NI (recovery on impairment.)

Question 9

Recoverable amount for ASPE

Answer 9

Recoverable amount = 
Future cash flows UNDISCOUNTED
\+ future disposition amount (sale)
- any costs with future sale 
= Recoverable amount

If carrying > recoverable write down to FMV

Question 10

Impairment loss for ASPE

Answer 10

Carrying - fair value (what asset could sell for now)

• IFRS is carrying - recoverable

Impairment loss cannot be reversed