Impairment of Assets

Question 1

Cash generating unit

Answer 1

a CGU s the smallest group of assets that can generate independent cash flows (IFRS only)

Question 2

Recoverable amount

Answer 2

• the higher of:
  1) FV - disposal costs
  2) Value in use (discounted estimated future cash flows)

Question 3

4 step process for impairment of assets

Answer 3

1) Asset grouping (CGU = IFRS, “asset group’ = ASPE)
2) Impairment test requirements (annual impairment tests for intangibles not yet amortized, Test for impairment when indication of such, Under ASPE only need to test for impairment if obvious, Impairment can be internal (change in use) or external (market value))
3) Recoverable amount (higher of FV - disposal costs and Value in use, however, under ASPE there is a different 2 step approach, and RA is discounted under IFRS and undiscounted under ASPE)
4) Impairment test and write down (loss = RA - CA)

Question 4

ASPE 2 step approach to impairment recoverable amount

Answer 4

1) compare CA to RA (undiscounted): if CV > RA =, impairment exists and move to step 2
2) determine FV and compare to CA: loss = FV - CA (there will never be gain under ASPE)

Question 5

Reversal of impairment loss

Answer 5

• IFRS only
• write up to the lesser of: Recoverable amount and carrying value that would initially exist if no impairment was recognized

Question 6

IAS 36 vs ASPE 3063 - Impairment steps

Answer 6

IFRS: 1) identify CGU, 2) identify impairment indicators, 3) if impairment exists, determine recoverable amount (discounted), 4) write-down to recoverable amount
ASPE: 1) identify asset group, 2) monitor for impairment, 3) if impairment, determine recoverable amount (undiscounted), 4) write-down to fair value