Ias 36

Question 1

Impairment of assets

Answer 1

Reduction in the recoverable amount of an asset or cash generating unit below its carrying amount

Question 2

Carry out impairment review

Answer 2

Annually if

1. Intangible asset is not being amortised due to indefinite useful life
2. Goodwill has arisen on a business combination

Otherwise

Only where there is an indication that impairment has occurred

Question 3

Indication of impairment ( external)

Answer 3

1. Unexpected decrease in assets market value
2. Significant adverse change ( taken place or will take place)in tech, market, economic, legal environment.
3. Increased interest rates have decreased an assets recoverable amount
4. Entity’s net assets are measured at more than its market capitalization rate

Question 4

Impairment indication ( internal)

Answer 4

Evidence of obsolescence or damage

Use is or will be materially reduced

Economic performance of asset has been or will be worse than expected

Question 5

Impairment calculation

Answer 5

When ca is greater than recoverable amount

Question 6

Recoverable amount

Answer 6

Higher of
Fair value less cost to sell
And
Value in use

Question 7

Cost to sell

Answer 7

Any cost directly attributable to disposal of asset

Question 8

Value in use

Answer 8

Calculated by estimating future cash inflows and outflows from the use of the asset and its ultimate disposal and applying a suitable discount rate to these cash flows

Question 9

Recognize impairment

Answer 9

Impairment loss is charged In soploci

1. If it has been previously revalued up ward - recognise impairment in OCI and debit revaluation reserve Until surplus is nil. Remainder of impairment loss is recognised in p/l
2. Recoverable amount is then depreciated or amortised over remaining useful life

Question 10

Cash generating units

Answer 10

Segments of the business whose income streams are largely independent of each other.

E.g. most likely the same as SBU,

Could be subsidiary or associate in a corporate group

Question 11

Allocating assets to CGU

Answer 11

Ca of cgu includes ca of assets that can be attributed to cgu and will generate cash inflows used In Determining value in use of cgu

Corporate assets( assets used in several cgu )
Gw - often relates to whole business 

They Don’t generate cash inflows independently

They should be allocated to cgu on reasonable and consistent basis

Cgu to which goodwill has been allocated must be tested for impairment annually

Question 12

Allocate impairment to cgu

Answer 12

In following order

1. Goodwill
2. Other assets in proportion to ca

Ca of asset cannot be reduced below highest of

Fv less cost to sell
Value in use
Nil

Question 13

Reversal of impairment

Answer 13

Happens when actual events turn out better than predicted

1. Should be reviewed at reporting date to see if it has reversed
2. Reversal is recognised as income in p/l
3. If impairment was against revaluation surplus then it is recognised in oci and credited in revaluation reserve
4. Reversal must not increase value above what would have been charged if it was not impaired. ( take dep in accounting)
5. Dep should reflect changed ca

Impairment loss for gw can not be reversed

Question 14

Disclose

Answer 14

Losses recognised
Reversal recognised

For each

• amount and event causing it
• recoverable amount of asset
• whether the recoverable amount is fv or value in use
• level of fv heirarchy
• discount rate