Impairment of Assets (IAS 36)
Presenters : Caryn Maitland CA(SA)
Overview
IAS 36, Impairment of Assets, is an International Accounting Standard that aims to ensure that assets are not carried at a value higher than their recoverable amount. This standard applies to all assets except those for which other standards address impairment, such as inventories, deferred tax assets, and financial assets within the scope of IFRS 9.
The core principle of IAS 36 is that if an asset's carrying amount exceeds its recoverable amount, the asset is considered impaired. The entity must then reduce the carrying amount to its recoverable amount and recognize an impairment loss in the financial statements.
Join Caryn Maitland CA(SA) and learn how to identify and account for asset impairments, ensure compliance and avoid overstating asset values.
Learning objectives
Attending this webinar will equip you with the following skills:
- Understand the concept of impairment and its significance in financial reporting.
- Identify the assets that fall under the scope of IAS 36.
- Determine the recoverable amount of an asset, considering both its fair value less costs to sell and its value in use.
- Recognize and measure impairment losses.
- Understand the accounting treatment for impairment losses, including their impact on depreciation and amortization.
- Identify the circumstances under which impairment losses can be reversed and the accounting treatment for such reversals.
- Apply the specific requirements for testing goodwill and intangible assets with indefinite useful lives for impairment.
- Understand the disclosure requirements related to impairment of assets.
Content
The webinar will cover the following topics:
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Introduction to IAS 36
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The objective and scope of the standard
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Key definitions: carrying amount, recoverable amount, impairment loss, cash-generating unit
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The principle of not carrying assets at more than their recoverable amount
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- Identifying Impairment
- Indicators of impairment: internal and external sources of information
- When to test for impairment: annual testing for certain assets, other assets when indicators exist
- Measuring the Recoverable Amount
- Determining the recoverable amount: the higher of fair value less costs to sell and value in use
- Estimating fair value less costs to sell
- Estimating value in use: future cash flows, discount rate
- Considerations for specific assets: assets with finite useful lives, intangible assets, goodwill
- Recognizing and Measuring Impairment Losses
- Recognizing impairment losses in the income statement
- Impact on depreciation and amortization
- Allocating impairment losses to cash-generating units
- Reversing Impairment Losses
- Conditions for reversing impairment losses
- Accounting treatment for reversals
- Limitations on the reversal of impairment losses
- Impairment of Goodwill
- Annual impairment testing for goodwill
- Allocating goodwill to cash-generating units
- Accounting for goodwill impairment losses
- Non-reversal of goodwill impairment losses
- Disclosure Requirements
- Information about impaired assets
- Impairment losses recognized or reversed
- Key assumptions used in determining recoverable amounts
