IAS 36

IAS 36

1. Impairment of Assets

2. History

   • 1997 - Exposure Draft E55 Impairment of Assets
   • 1998 - IAS 36 Impairment of Assets
   • 2004 - IAS 36 Impairment of Assets revised
   • 2008 - Amended by Annual Improvements to IFRSs 2007
   • 2009 - Amended by Annual Improvements to IFRSs 2009
   • 2013 - Amended by Recoverable Amount Disclosures for Non-Financial Assets

3. Objective

   • To ensure that assets are carried at no more than their recoverable amount, and to define how recoverable amount is determined.

4. Scope

   • inventories
   • assets arising from construction contracts
   • deferred tax assets
   • assets arising from employee benefits
   • financial assets
   • investment property carried at fair value
   • agricultural assets carried at fair value
   • insurance contract assets
   • non-current assets held for sale

5. Key definitions

   • Impairment loss: the amount by which the carrying amount of an asset or cash-generating unit exceeds its recoverable amount
   • Carrying amount: the amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses
   • Recoverable amount: the higher of an asset's fair value less costs of disposal* (sometimes called net selling price) and its value in use
   • Fair value: 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
   • Value in use: the present value of the future cash flows expected to be derived from an asset or cash-generating unit

6. Identifying an asset that may be impaired

   • At the end of each reporting period, an entity is required to assess whether there is any indication that an asset may be impaired
   • an intangible asset with an indefinite useful life
   • an intangible asset not yet available for use
   • goodwill acquired in a business combination

7. Indications of impairment

   • External sources
     • market value declines
     • negative changes in technology, markets, economy, or laws
     • increases in market interest rates
     • net assets of the company higher than market capitalisation
   • Internal sources
     • obsolescence or physical damage
     • asset is idle, part of a restructuring or held for disposal
     • worse economic performance than expected
     • for investments in subsidiaries, joint ventures or associates, the carrying amount is higher than the carrying amount of the investee's assets, or a dividend exceeds the total comprehensive income of the investee