IAS 36 - Impairment

IAS 36
Impairment of Assets by Claudia Mezzabotta
Dottore commercialista e revisore legale in Milan,
Italy
Member of IASCF SMEIG – London (UK)
Member of EFRAG SME WG – Brussels (Belgium)

November 5-6, 2012
“International Accounting” Course
MIM Course
UNITN
Trento - Italy

Objectives of IAS 36

• To ensure that assets do not exceed their recoverable amount • To define how recoverable amount is calculated
• To indicate when impairment tests need to be conducted
• To prescribe disclosures to be given concerning the impact of impairment on an entity’s financial performance

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Scope of IAS 36

IAS 36
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applies to all assets except :
Inventories (see IAS 2)
Assets arising from construction contracts (see IAS 11)
Deferred tax assets (see IAS 12)
Assets arising from employee benefits (see IAS 19)
Financial assets (see IAS 39)
Investment property carried at fair value (see IAS 40)
Certain agricultural assets carried at fair value (see IAS 41)
Insurance contract assets (see IFRS 4)
Assets held for sale (see IFRS 5)

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Scope of IAS 36

IAS 36 applies to (among other assets):
– Tangible assets
• Land and buildings
• Machinery and equipment
• Ships, aircrafts, motor vehicles
• Investment property carried at cost (see IAS 40)
– Intangible assets
• Goodwill
• Computer software
• Patent, brand, customer list
• Development costs

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Definitions
Impairment :
– An asset is impaired when its carrying amount exceeds its recoverable amount
Carrying amount :
– The amount at which an asset is recognised in the balance sheet after deducting accumulated depreciation and accumulated impairment losses
Recoverable amount :
– The higher of an asset's fair value less costs to sell and its value in use 5

Definitions
Fair value :

– The amount obtainable from the sale of an asset in a bargained transaction between knowledgeable, willing parties
Value in use :

– The discounted