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IAS 36 Impairment of Assets

IAS 36 Impairment of Assets prescribes the procedures to apply to ensure assets are carried at no more than their recoverable amount. Revised March 2004. Effective 31 March 2004.

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*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.

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Annual period starts
Effective version of standard
Notes on amendments 
On or after 1 January 2023 IAS 36 2021 Issued Standards 
Includes amendments 1, 2 and 3*
1 January 2018 – 31 December 2022
IAS 36 2020 Required Standards
Includes amendments 1 and 2

*Not UK endorsed as at 23 June 2021. Read more on UK endorsement of IFRS standards. Not EU endorsed as at 23 June 2021. Read more on EU endorsement of IFRS standards.

The Required Standards book for a particular year assumes that there is no early application of issued but not yet effective IFRSs; The Issued Standards book assumes early application of all issued IFRSs. For the latest version of the standard, and where the amendments are to be adopted early, refer to IAS 36 2021 Issued Standards.

Recent amendments

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1. IFRS 9 Financial Instruments amendment to IAS 36

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

As a result of the issue of IFRS 9, IAS 36 is amended to:

  • Exclude financial instruments accounted for in accordance with IFRS 9, rather than IAS 39.
  • Refer to IFRS 9 for the impairment of financial assets not within the scope of IAS 36.
2. IFRS 15 Revenue from Contracts with Customers amendments to IAS 36

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

As a result of the issue of IFRS 15, the IAS 36 scope exclusion for ‘assets arising under construction contracts’ is amended to assets arising under IFRS 15.

3. IFRS 17 Insurance Contracts amendment to IAS 36*

To be applied to periods beginning on or after 1 January 2023 (originally 2021, subsequently deferred). Earlier adoption is permitted.

IAS 36 is amended to exclude from its scope IFRS 17 insurance contracts that are assets. This exclusion replaces the previous exclusion relating to IFRS 4 insurance contracts.

*Not UK endorsed as at 23 June 2021. Read more on UK endorsement of IFRS standards. Not EU endorsed as at 23 June 2021. Read more on EU endorsement of IFRS standards.

The following interpretation refers to IAS 36

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.

UK reduced disclosures

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

There are no amendments to IAS 36 in order to comply with the Companies Act and related Regulation.

Disclosure exemptions

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.

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This page was last updated 23 June 2021