IAS 36 Impairment of Assets

Key vocabulary terms and technical definitions extracted from International Accounting Standard 36 (IAS 36) regarding the impairment of assets.

Carrying amount

The amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.

Cash-generating unit

The smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

Corporate assets

Assets other than goodwill that contribute to the future cash flows of both the cash-generating unit under review and other cash-generating units.

Costs of disposal

Incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.

Depreciable amount

The cost of an asset, or other amount substituted for cost in the financial statements, less its residual value.

Depreciation (Amortisation)

The systematic allocation of the depreciable amount of an asset over its useful life.

Fair value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date as defined in IFRS 13.

Impairment loss

The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.

Recoverable amount

The higher of an asset’s or cash-generating unit’s fair value less costs of disposal and its value in use.

Useful life

Either the period of time over which an asset is expected to be used by the entity or the number of production or similar units expected to be obtained from the asset by the entity.

Value in use

The present value of the future cash flows expected to be derived from an asset or cash-generating unit.

Restructuring

A programme that is planned and controlled by management and materially changes either the scope of the business undertaken by an entity or the manner in which the business is conducted.

Traditional approach (to present value)

An accounting application of present value that uses a single set of estimated cash flows and a single discount rate, often described as 'the rate commensurate with the risk'.

Expected cash flow approach

A measurement tool that uses all expectations about possible cash flows instead of the single most likely cash flow and incorporates the use of probabilities.

Discount rate

A pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the future cash flow estimates have not been adjusted.

Goodwill

An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.

Cash flow projection limit

Management's estimates of future cash flows are based on the most recent budgets/forecasts for a maximum of $5$ years, unless a longer period can be justified.