IAS 36

Impairment of Assets
Definition
of terms
Carrying amount
The amount at which an asset is
recognized after deducting any
accumulated depreciation
(amortization) and accumulated
impairment losses thereon.
Cash generating
unit
Smallest identifiable group of assets
that generates cash inflows that are
largely independent of the cash
inflows from other assets
Corporate assets
Assets other than goodwill that
contribute to the future cash flows of
both the cash-generating unit under
review and other cash-generating
units
Cost of disposal
Incremental costs directly attributable
to the disposal of an asset or cash-
generating unit, excluding finance
costs and income tax expense
Depreciable
amount
The cost of an asset, or other amount
substituted for cost in the financial
statements, less its residual value
Depreciation /
Amortization
The systematic allocation of the
depreciable amount of an asset over
its useful life
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
Impairment Loss
The amount by which the carrying
amount of an asset or a cash-
generating unit exceeds its
recoverable amount
Recoverable
amount
The higher of its fair value less costs of
disposal and its value in use
Useful life
Is either:
a. The period of time over which an
asset is expected to be used by
the entity; or
b. The number of production or
similar units expected to be
obtained from the asset by the
entity
Value in use
The present value of the future cash
flows expected to be derived from an
asset or cash-generating unit
Impairment
 Impairment
An asset is impaired when its
carrying amount exceeds its
recoverable amount

There are indications of

impairment
 External sources
of information
1. Significant decline in market value as a result
of passage of time or normal use
2. Changes in the technological, market,
economic, or legal environment
3. Material increases in the market interest
rates or rates of return
4. CA of net assets of the entity is more than
market capitalization
 Internal sources
of information
1. Physical damage of obsolescence of the
asset.
2. Significant changes have taken place or are
likely to take place which have an adverse
affect on the entity or the manner of using
the assets.
3. Evidence that indicates that the economic
performance of an asset is, or will be, worse
than expected.
 Indicators in
respect of dividends
Dividends received from a subsidiary, joint venture
or associate

1. CA of investee in investor’s separate FS > CA in

the consolidated FS of investee’s net assets
(including goodwill); or
2. Dividend from investee > the total
comprehensive income of investee (in the
period that dividend is declared)
 Timing of
impairment
tests
Annually and at any
point when indicators
are present
At any point when
• Goodwill indicators are present
• Intangible assets
with an indefinite
• All other non-
useful life
financial assets
• Intangible assets
(within the scope
not yet available
of IAS 36)
for use
 Reversal of
impairment
Individual asset
- Recognize in profit and loss unless asset carried at
revalued property
Cash-generating units
= allocated to assets of CGUs on a pro-rata basis
Goodwill
- never reversed
Disclosures
Disclosure by class of assets
• Impairment losses recognized in profit or loss
• Impairment losses reversed in profit or loss
• Which line item(s) of the statement of comprehensive income
• Impairment losses on revalued assets recognized in OCI
• Impairment losses on revalued assets reversed in OCI
Disclosure by reportable segment
• Impairment losses recognized
• Impairment losses reversed
Other Disclosures
• If an individual impairment loss (reversal) is material, disclose
o Events and circumstances resulting in the impairment loss
o Amount of the loss or reversal
o Individual asset: nature and segment to which it relates
o Cash generating unit: description, amount of impairment loss (reversal) by
class of assets and segment
o If recoverable amount is FV less costs of disposal, the level of the fair value
hierarchy within which the FV measurement is categorised, the valuation
techniques used to measure FV less costs of disposal and the key assumptions
used in the measurement of FV measurements categorised within “level 2”
and “level 3” of the FV hierarchy
o If recoverable amount has been determined on the basis of value in use, or on
basis of FV less costs of disposal using a PV technique, discount rate
Other Disclosures
• If impairment losses recognized (reversed) are material in aggregate to
the financial statements as a whole, disclose:
o Main classes of assets affected
o Main events and circumstances