IAS 36 Impairment of Assets

*UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Synopsis

Assets should be assessed for impairment at the end of each reporting period. If there are indications of impairment, an impairment test should be carried out. Regardless of whether there are indications of impairment, such a test must be carried out for:

• An intangible asset with an indefinite life or not yet available for use
• Goodwill acquired in a business combination.

Where the carrying value of an asset exceeds its recoverable amount, an impairment loss is recognised to reduce carrying value to recoverable amount.

Where it is impossible to calculate the recoverable amount of individual assets, cash generating units should instead be tested for impairment. These are the smallest identifiable groups of assets that generate cash independently of other assets.

Any impairment loss should be recognised in profit or loss except to the extent that it reverses a previous revaluation gain on the same asset.

• Read the unaccompanied version of IAS 36

The International Accounting Standards Board (IASB) provides free access to the consolidated unaccompanied international accounting standards for the current year through its website. Free registration is required.

This unaccompanied version does not include additional content that accompanies the full standard, such as illustrative examples, implementation guidance and bases for conclusions.

Which version of the standard?

Financial Reporting Faculty members who joined the faculty prior to 1 November 2022 have premium access to the consolidated edition of IFRS and amendments through the IASB's IFRS Standards Navigator service. Please log into IFRS Standards Navigator to access electronic versions of the standards through these links.

Please be aware that as part of the changes to ICAEW faculty membership, this service will be withdrawn after 31 December 2022.

Recent amendments

Full access to details of all the amendments is only available to Financial Reporting Faculty members. Find out how to join the faculty.

The following interpretation refers to IAS 36

• IFRIC 1 Existing Decommissioning, Restoration and Similar Liabilities
  Addresses accounting for a change in a provision that is included in the carrying amount of an item of PPE.
• IFRIC 10 Interim Financial Reporting and Impairment
  Addresses a conflict between the requirements of IAS 34 and other standards as regards impairment losses on goodwill and financial assets.
• IFRIC 12 Service Concession Arrangements
  Accounting guidance for arrangements where a contract is granted for the supply of public services such as roads.
• SIC 32 Intangible Assets – Website Costs
  Addresses accounting for costs associated with the development of a website.

Current proposals

1. As a result of the post-implementation review of IFRS 3 the IASB has initiated a project to consider whether amendments should be made to IFRS 3 and IAS 36 to:
   
   • Improve disclosures about acquired businesses, and
   • Simplify accounting for goodwill
   • Improve aspects of the impairment test for goodwill.

   A discussion paper was published in March 2020.

   • Read DP/2020/1 Business Combinations - Disclosures, Goodwill and Impairment

UK reduced disclosures – FRS 101

UK qualifying parents and subsidiaries can take advantage of FRS 101 Reduced Disclosure Framework. Find out more on which entities qualify and the criteria to be met.

Amendments to the standard for FRS 101 preparers

Disclosure exemptions for FRS 101 preparers

FRS 101 paragraph 8(l) states that a qualifying entity is exempt from most of the disclosure requirements of IAS 36 in relation to cash generating units which contain goodwill or an intangible asset with an indefinite useful life. The exemption particularly applies to the disclosure of assumptions, the effect of changes in assumptions and valuation techniques.

Equivalent disclosures must, however, be made in the consolidated financial statements of the group in which the entity is consolidated.

IAS 36 paragraphs for which exemption is available: 134(d)-(f) and 135(c)-(e).

An amendment to FRS 101 as a result of the 2013/2014 review cycle also exempted entities from applying IAS 36 paragraphs 130 (f)(ii) – (iii) provided that equivalent disclosures are made in the consolidated financial statements. The relevant disclosures relate to recoverable amount when established as fair value less costs of disposal.

Other resources

Factsheets

• Applying IAS 36 Impairment of Assets

Bitesize Briefings and Webinars

• Bitesize Briefing: COVID-19 and impairment of assets

This page was last updated 30 August 2022.