IAS 36- Imparement Of Non-Current Assets Flashcards
How can we recover a value of an asset?
- sell it (net realisable value)
- the asset can be used to generate cash flow (value in use)
Requirements:
Carrying amount
l
lower of
/ \
Net book value Recoverable amount
l
Higher of
/ \
Net realisable value Value in use
The objectives of IAS 36- are to ensure that
- non current assets are recorded in the accounts at no more than their recoverable amount
- any resulting impairment loss is measured and recognised on a consistent basis; and sufficient information is disclosed so users understand impact of impairment
What does IAS 36 require
- IAS 36 requires that impairment reviews should be carried out if there is an indication that an individual asset may have fallen in value
Indicators in a possible fall in value include:
- a loss in the current period together with either past losses or expected future losses
- a significant fall in the market value of an asset
Business problems that might cause impairment
- a fall in price due to increased competition