IAS 36 – Impairment of Assets

Part 1: Introduction + Executive Summary

Part 2: Why impairment is needed?
Part 3: Impairment, Measuring recoverable amount
Part 4: Impairment loss – Individual assets other than goodwill, Cash generating unit (CGU)
Part 5: Impairment loss for cash-generating unit (CGU), Reversing an impairment loss

Read IAS 36 Summary Online  IAS 36 Test



Introduction

International Accounting Standard 36: Impairment of Assets requires that entity’s assets needs to be checked for appropriate valuation on timely basis. Sometimes the carrying value of asset is not representative of benefits an asset can render and require value to be reduced to fair amount to achieve true and fair representation.

Executive Summary

As per IAS 36 if the carrying amount of asset is more than the recoverable amount of asset then it must be reduced to recoverable amount. Recoverable amount is higher of net realisable value and value in use. If it is not easy to determine the value addition by individual asset then IAS 36 allows to treat multiple asset as one unit to calculate impairment and ultimately the related impairment is written off on proportionate basis. However, things get a little complex if it involves specific impairment and goodwill recognized as asset and IAS 36 provides detailed guidelines on such matters.