Asset Impairment Flashcards
What is the IAS and ASPE
IAS 36 and ASPE 3063
What is impairment
An asset is considered to be impaired when an entity is unable to recover the carrying amount of the asset
How is Impairment assessed?
Based on independent assets.
CGU if the recoverable amount of the asset cannot be determined
When to test of impairment
indicators of impairment
annual tests for select assets
What are the internal indicators of impairment
evidence of obsolescence or physical damage
• significant changes in the use of the asset / CGU, such as discontinuance, disposal, or restructuring
• declining asset / CGU performance
What are the external indicators impairment
- significant decline in market value
- significant change in the technological, market, economic, or legal environment in which the entity operates, having an adverse effect on the use of the asset
- increases in market interest rates, decreasing the asset / CGU recoverable amount
What assets require annual impairment tests
Intangible assets with indefinite useful life
Intangible assets not yet available for use
CGUs to which goodwill has been allocated
How is Impairment measured
Determined the recoverable amount is the Higher of
1. Fair value less cost of disposal
2. value in use(estimate future cashflows)- discounting
For value in use, net cashlows, use cummulative then use pv for salvage value
how is Impairment recorded
if recoverable amount less that carrying/NBV, then Debit asset and CR net income
How impairment measured under ASPE
- Compare the carrying amount to undiscounted cash flows (recoverable amount).
• If the carrying amount exceeds the recoverable amount, impairment exists; move to Step 2.
- Determine fair value and compare it to the carrying amount.
• Loss = Fair value – Carrying amount
