Aya Kurehara

CH13
IAS 36 addresses mainly accounting for impairment of goodwill, intangible assets and property,
plant and equipment. The standard includes requirements for identifying an impaired asset,
measuring its recoverable amount, recognizing or reversing any resulting impairment loss, and
disclosing information on impairment losses or reversals of impairment losses.
At each balance sheet date, review all assets to look for any indication that an asset may be
impaired (its carrying amount may be in excess of the greater of its net selling price and its
value in use). IAS 36 has a list of external and internal indicators of impairment. If there is an
indication that an asset may be impaired, then you must calculate the asset's recoverable
amount.
The recoverable amount of an asset is its net selling price or its value in use, whichever is
higher, both based on present value calculations.
The net selling price is the amount obtainable from the sale of an asset in an arm's length
transaction between knowledgeable willing parties, less the costs of disposal.
The value in use is the amount obtainable from the use of an asset until the end of its useful life
and from its subsequent disposal.
Cash flow projections based on reasonable and supportable assumptions that reflect the asset
in its current condition and represent management's best estimate of the set of economic
conditions that will exist over the remaining useful life of the asset. Estimates of future cash
flows should include all estimated future cash inflows and cash outflows except for cash flows
from financing activities and income tax receipts and payments.
An impairment loss should be recognized as an expense in the income statement for assets
carried at cost and treated as a revaluation decrease for assets carried at revalued amount.
An impairment loss should be reversed (and income recognized) when there has been a
change in the estimates used to determine an asset's recoverable amount since the last
impairment loss was recognized.
An impairment loss should be recognized whenever the recoverable amount of an asset is less
than its carrying amount
Goodwill should be tested for impairment annually. To test for impairment, goodwill must be
allocated to each of the acquirer's cash-generating units, or groups of cash-generating units,
that are expected to benefit from the synergies of the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units or groups of units.