IAS 36 – Impairment of Assets

Question 1

Which Assets Does IAS 36 Apply To?

Answer 1

IAS 36 applies to most non-current assets, including:
✅ Property, Plant & Equipment (PPE)
✅ Intangible Assets (e.g., goodwill, patents)
✅ Investment Property (if measured at cost)
✅ Right-of-Use Assets (leases)
✅ Investments in Subsidiaries, Joint Ventures, or Associates

Exemptions:
❌ Inventories (IAS 2)
❌ Deferred tax assets (IAS 12)
❌ Financial instruments (IFRS 9)

Question 2

How to Measure Impairment?

Answer 2

Higher of:
✅ Fair Value Less Costs to Sell (FVLCTS) (price in market – selling costs)
✅ Value in Use (VIU) (present value of future cash flows from asset use)

Compare with Carrying Amount:
If Recoverable Amount is less than the Carrying Amount, impairment loss is recognized.

Question 3

Recognizing & Accounting for Impairment Loss

Answer 3

Dr. Impairment Loss (Income Statement)
Cr. Asset (Reduce Carrying Amount)