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IAS 36 Impairment of Assets

IAS 36 Impairment of Assets prescribes the procedures to apply to ensure assets are carried at no more than their recoverable amount.

Applying IAS 36 Impairment of Assets

This factsheet provides a summary of the basic principles of accounting for impairments and practical tips on application.

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Summary

Assets should be assessed for impairment at the end of each reporting period. If there are indications of impairment, an impairment test should be carried out. Regardless of whether there are indications of impairment, such a test must be carried out for:

  • An intangible asset with an indefinite life or not yet available for use
  • Goodwill acquired in a business combination.

Where the carrying value of an asset exceeds its recoverable amount, an impairment loss is recognised to reduce carrying value to recoverable amount.

Where it is impossible to calculate the recoverable amount of individual assets, cash generating units should instead be tested for impairment. These are the smallest identifiable groups of assets that generate cash independently of other assets.

Any impairment loss should be recognised in profit or loss except to the extent that it reverses a previous revaluation gain on the same asset.

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UK reduced disclosures – FRS 101

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Our FRS 101 page gives more information on which entities qualify and the criteria to be met.

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ICAEW factsheets and guides

The Corporate Reporting Faculty's annual IFRS factsheets provide a more detailed discussion of recent IFRS amendments.

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