IAS 36 Impairment of Assets
IAS 36 ensures that assets are not carried at more than their recoverable amount. If the carrying amount exceeds the recoverable amount, an impairment loss is recognized.
Related Standards
Explanation
The recoverable amount is the higher of:
• fair value less costs of disposal, and
• value in use – the present value of future cash flows expected from the asset.
Assets are tested when there is an indication of impairment. Goodwill and certain intangible assets are tested at least annually. Where individual assets do not generate independent cash flows, testing is performed at the level of a cash-generating unit. Impairment losses – except on goodwill – can be reversed if conditions improve.
IAS 36 applies, among others, to property, plant and equipment, right-of-use assets, and intangible assets. Under US GAAP, impairment of long-lived assets is addressed in ASC 360 with a different, two-step approach.
Why It Matters
Lessors with operating leases and lessees with right-of-use assets must consider impairment, for example when leased equipment is idle, returned early, or loses value. Reliable asset, contract, and cash flow data supports timely impairment assessments.
Related Terms
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