PAS 36: IMPAIRMENT OF ASSETS When goodwill relates to a cash‑generating unit but

has not been allocated to that unit, the unit shall be

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 recognize an
impairment loss.
Measurement of Recoverable Amount
Under PAS 36, the 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.
Fair Value less Costs of Disposal
Costs of disposal includes legal costs, stamp duty and
similar transaction taxes, costs of removing the asset,
and direct incremental costs to bring an asset into
condition for its sale.
Recognition of an Impairment Loss
● 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 recognized
immediately in profit or loss, unless the asset
is carried at revalued amount in accordance
with another Standard
Cash Generating Units
tested for impairment, whenever there is an indication
that the unit may be impaired.
Impairment loss for a cash‑generating unit
An impairment loss shall be recognized for a
cash‑generating unit if, and only if, the recoverable
amount of the unit (group of units) is less than the
carrying amount of the unit (group of units).
Reversal of Impairment Loss
An entity shall assess at the end of each reporting
period whether there is any indication that an
impairment loss recognized in prior periods for an
asset other than goodwill may no longer exist or may
have decreased.
● An impairment loss recognized in prior
periods for an asset other than goodwill shall
be reversed if, and only if, there has been a
change in the estimates used to determine the
asset’s recoverable amount.
Reversing an impairment loss for an individual asset
A reversal of an impairment loss for an asset other
than goodwill shall be recognized immediately in
profit or loss.

An asset’s cash‑generating unit is the smallest group

of assets that includes the asset and generates cash
inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Recoverable amount and carrying amount of a
cash‑generating unit

The carrying amount of a cash‑generating unit shall be

determined on a basis consistent with the way the
recoverable amount of the cash‑generating unit is
determined.
Goodwill
For the purpose of impairment testing, goodwill
acquired in a business combination shall, from the
acquisition date, be allocated to each of the acquirer’s
cash‑generating units.

Testing cash‑generating units with goodwill for

impairment