IAS 36
How?
Compare Carrying Amount (Calc IAS16) > Recoverable Amount = Impairment Loss (p/l OR COS OR Rev deficit)
At END of Reporting Period:
- Test indications (annually)
- Intangible asset with indefinite useful life
- Intangible asset not yet available for use
- Goodwill acquired
- if indications apply cal Recoverable Amount
Indications:
External:
- Assets value ↓ more than usual
- Changes in market, tech, economy eg Competitor stealing market
- Market Interest Rates/ Other Market Rates ↑ affect discount rate*-value in use
- CA of net assets > Market Capitalism
Internal:
- Evidence of obsolescence/damage
- Asset is planned to become idle, discontinue, restructure operation, dispose A before expected date
- Evidence that economic performance will be worse than estimated
Indications Apply: Cal RA as HIGHER OF:
- Fair value (given) – Cost to sell (location + condition)
Cost to sell examples: legal costs, stamp duty, dismantling cost
- Value in use F Cashflow – P Cashflow excl finance cost & tax
NB After you have the impairment loss there may be a change in estimate
- Can be eg useful life, dep method, rate
- Change Applies from FUTURE periods.
- Therefore if you change in March 2014 – use old dep for rest of 2014…get impairment loss nd CA then:
- 2015 calc dep on new estimate: DEP = new CA – new Residual NB if u hav an impairment loss
Remaining UL the CA new
Reversal: ( other comprehensive income ( Rev Surplus)/ other income)
- Must hav had a previous impairment loss & LIMITED by it
- Impairment on goodwill CANNOT be reversed
- Impairment no longer exists / may have decreased
- For above to occur there must have been an estimate that changed
- Changed: fv – C2S to value in use, for Value in use… disc/ cash flow change, fv- change in cost/fv
- Assess indications:
- External opposite to above
- Internal : costs incurred to improve/enhance A + restructure the operation
- Economic performance expected to be better