IAS 36-Impairment of AssetsIAS 36-

Objective

The objective of this Standard is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures

Scope

This Standard shall be applied in accounting for the impairment of all assets, other than:

• inventories (see IAS 2 Inventories);
• contract assets and assets arising from costs to obtain or fulfil a contract that are recognised in accordance with IFRS 15 Revenue from Contracts with Customers;
• deferred tax assets (see IAS 12 Income Taxes);
• assets arising from employee benefits (see IAS 19 Employee Benefits);
• financial assets that are within the scope of IFRS 9 Financial Instruments;
• investment property that is measured at fair value (see IAS 40 Investment Property);
• biological assets related to agricultural activity within the scope of IAS 41 Agriculture that are measured at fair value less costs to sell;
• contracts within the scope of IFRS 17 Insurance Contracts that are assets and any assets for insurance acquisition cash flows as defined in IFRS 17; and
• non-current assets (or disposal groups) classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Definitions

Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.

A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Corporate assets are assets other than goodwill that contribute to the future cash flows of both the cash-generating unit under review and other cash-generating units.

Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.

Depreciable amount is the cost of an asset, or other amount substituted for cost in the financial statements, less its residual value.

Depreciation (Amortisation) is the systematic allocation of the depreciable amount of an asset over its useful life.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. (See IFRS 13 Fair Value Measurement.)

An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs of disposal and its value in use.

Useful life is either:

• the period of time over which an asset is expected to be used by the entity; or
• the number of production or similar units expected to be obtained from the asset by the entity.

Measurement

This Standard defines recoverable amount as the higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use. Paragraphs 19–57 set out the requirements for measuring recoverable amount. These requirements use the term ‘an asset’ but apply equally to an individual asset or a cash-generating unit.

Paragraph 10 requires an intangible asset with an indefinite useful life to be tested for impairment annually by comparing its carrying amount with its recoverable amount, irrespective of whether there is any indication that it may be impaired. However, the most recent detailed calculation of such an asset’s recoverable amount made in a preceding period may be used in the impairment test for that asset in the current period, provided all of the following criteria are met:

• if the intangible asset does not generate cash inflows from continuing use that are largely independent of those from other assets or groups of assets and is therefore tested for impairment as part of the cash-generating unit to which it belongs, the assets and liabilities making up that unit have not changed significantly since the most recent recoverable amount calculation;
• the most recent recoverable amount calculation resulted in an amount that exceeded the asset’s carrying amount by a substantial margin; and
• based on an analysis of events that have occurred and circumstances that have changed since the most recent recoverable amount calculation, the likelihood that a current recoverable amount determination would be less than the asset’s carrying amount is remote.

Recognising and measuring

set out the requirements for recognising and measuring impairment losses for an individual asset other than goodwill. Recognising and measuring impairment losses for cash-generating units and goodwill are dealt

If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss.

An impairment loss shall be recognised immediately in profit or loss, unless the asset is carried at revalued amount in accordance with another Standard (for example, in accordance with the revaluation model in IAS 16). Any impairment loss of a revalued asset shall be treated as a revaluation decrease in accordance with that other Standard.

Disclosure

An entity shall disclose the following for each class of assets:

• the amount of impairment losses recognised in profit or loss during the period and the line item(s) of the statement of comprehensive income in which those impairment losses are included.
• the amount of reversals of impairment losses recognised in profit or loss during the period and the line item(s) of the statement of comprehensive income in which those impairment losses are reversed.
• the amount of impairment losses on revalued assets recognised in other comprehensive income during the period.
• the amount of reversals of impairment losses on revalued assets recognised in other comprehensive income during the period.

Recoverable Amount Disclosures for Non-Financial Assets was approved for issue by fifteen members of the International Accounting Standards Board (IASB). Mr Kabureck abstained from voting in view of his recent appointment to the IASB.