IAS 36 Impairment of Assets (Vocabulary Flashcards)

Vocabulary flashcards covering the key concepts from the IAS 36 Impairment of Assets notes.

Impairment

A reduction in the carrying amount of an asset when its recoverable amount is less than the carrying amount, with the loss recognized in the income statement.

Carrying amount (net book value)

The amount at which an asset is recognised on the balance sheet, after depreciation/amortization and any impairment losses.

Recoverable amount

The higher of an asset’s fair value less costs to sell and its value in use.

Value in use (VIU)

The present value of the expected future cash flows from using the asset, discounted to present value.

Fair value less costs to sell (FVLCS)

The amount obtainable from disposal of the asset minus costs of disposal.

Impairment loss

The amount by which the carrying amount exceeds the recoverable amount.

Scope of IAS 36 (in-scope assets)

Assets to which IAS 36 applies, including inventories, contract assets, deferred tax assets, assets arising from employee benefits, financial assets under IFRS 9, investment property measured at fair value, biological assets measured at fair value less costs to sell, deferred acquisition costs, and non-current assets held for sale.

Out-of-scope assets

Assets not covered by IAS 36, such as intangible assets including goodwill and brands, property, plant and equipment, and investments in subsidiaries, associates, and joint ventures.

Triggering event

An external or internal indicator that impairment may exist, prompting an impairment test (assessed at each reporting date).

Impairment test

The process to determine recoverable amount and recognize impairment if carrying amount exceeds recoverable amount.

Cash-generating unit (CGU)

The smallest group of assets that generates largely independent cash flows, used for impairment testing when impairment cannot be determined for an individual asset.

Allocation of impairment in a CGU

If impairment is required for a CGU, first write down goodwill to zero if possible, then allocate the remainder pro-rata among other assets in the CGU.

Reversal of impairment

Ability to reverse impairment losses for most assets after the impairment event, except for goodwill (reversals of goodwill impairment are prohibited); reversal cannot exceed the carrying amount that would have been reported had no impairment occurred.

Goodwill impairment testing frequency

Goodwill and indefinite-lived intangible assets must be tested for impairment at least annually (and when triggering events occur).