IAS 36 Flashcards
What are external sources impairment?
Decline in asset’s market value (property price fall)
Significant adverse change in technologica;, economic etc environment
What are internal sources of impairment?
Obsolescence
Significant changes in period or expected in what asset is used
Evidence that asset’s performance is worse than expected
Operating losses
Loss of key employee
What if carrying value > recoverable amount?
Asset is impaired and is written down to its recoverable amount
What is recoverable amount?
Greater of:
Fair value - cost to sell (FVLCTS)
Value in use (VIU)
What is recoverable amount?
Greater of FVLCTS and VIU
FVLCTS?
Amount receivable from sale of asset - costs of disposal
VIU?
PV of future cash flows from the asset
Calculate VIU?
Net cash flows * (1/1+cost of capital)^number of years
When must an entity use a CGU?
When it is not possible to estimate recoverable amount of an individual asset
Assets within CGU?
Smallest group of assets that generates cash flows
Net of associated goodwill
Goodwill and corporate assets are allocated
Allocation of impairment losses in CGU?
Firstly allocated to goodwill
Then other assets pro-rata
What is impairment?
Assets shouldn’t be carried at more than their value to the entity
What does minimum value represent?
No asset below:
Fair value less costs of disposal
VIU
Zero
Goodwill in CGU?
Is always deducted completely
What happens with expensed development?
Charged to SPL
What happens with depreciation of capitalised amount?
Charged to SPL
Calculate impairment loss charged to SPL?
Carrying amount - recoverable amount
If NRV is greater than inventory?
Means inventory is not impaired
Order of operations for CGU?
- Adjustments
- All of goodwill deducted
- Othjer adjustments is done pro-rata
Lichen Co expects machine to produce net cash flows of $30000 per annum for next three years. Cost of capital of Lichen Co is 8%
Calculate VIU?
30000 * 1/1.08^1 + 30000 * 1/1.08^2 + 30000 * 1/1.08^3
Carrying amount after impairment calculation?
Carrying amount - impairment loss
Reversal of impairment loss?
Carrying amonut if no impairment had occurred - carrying amount after impairment
Credit to SPL
What is done when an asset is impaired?
It is written down to its recoverable debt
