IAS 36 - Impairment of Assets – Definition

Impairment of Assets

The objective of IAS 36 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.

IAS 36 applies to (among other assets):

Land, buildings, machinery and equipment, investment property carried at cost, Intangible Assets, goodwill, investments in subsidiaries, associates, and joint ventures, assets carried at revalued amounts under IAS 16 and IAS 38

IAS 36 does not apply to:

Inventories (IAS 2), assets arising from construction contracts (IAS 11), deferred tax assets (IAS 12), assets arising from employee benefits (IAS 19), financial assets (IAS 39), investment property carried at fair value (IAS 40), certain agricultural assets carried at fair value (IAS 41), insurance contract assets (IFRS 4), assets held for sale (IFRS 5)

Key Steps

# Identifying an Asset That May Be Impaired
# Indications of Impairment
# Determining Recoverable Amount
# Fair Value Less Costs to Sell
# Value in Use
# Discount Rate (more information on Discount Rate)
# Recognition of an Impairment Loss
# Cash-Generating Units
# Impairment of Goodwill
# Disclosure

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