Impairment of Assets
The amount by which the carrying amount of an asset or a cgu exceeds its recoverable amount.
to ensure that assets are not overstated
there is no need to test for recoverability of the carrying amount of the asset
where there is any indication that an asset may be impaired
1. Intangible assets with indefinite useful lives
2. Intangible assets not yet available for use
3. Goodwill acquired in a business combination.
1. Carrying amount is considered to be uncertain
2. No subject to annual amortisation, so no ongoing reduction in the carrying amount
3. relates to the concept of depreciation
internal and external sources of evidence, impairment
1. Asset's value
2. Entity's environment / markt
3. Interest share
4. Market capitalisation
1. Physical damage
2. Change use within the entity
3. Economic performance of the Asset
The higher of its fair value less costs of disposal, and its value in use
The price that would be received to sell an asset at the measurement date
Incremental costs directly attributable to the disposal of an asset or cash generating unit, excluding finance costs and income tax expense
The present value of the future cash flows expected to be obtained from an asset
1. Additional valuederived form the grouping of assets
2. Synergies between the asset being measured and other assets
3. Legal rights specific to the current owner of the asset
4. Tax (dis) advantages specific to the current owner of the asset
1. Management's best estimate
2. Most recent financial budgets and forecasts
3. Growth rate should be realistic
4. Assets must be estimated in the current condition
5. Possible events won't be taken into consideration
6. Finance activities and income tax are not included
7. Cash flows from disposal will take specific future price increase into account
1. Reflect the time value of money
2. Reflecht the risks specific to the asset
an impairment loss is recognised immediately in p&l
any impairment loss is treated as a revaluation increase
the new recoverable amount
then the impairment test is applied to a cash generating unit
the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
1. Consider how management monitors the operations
2. Consider how management makes decisions about continuing or disposing assets and operations
3. If an active market exists for the output of a group of assets, this will be a CGU
4. If the output of a group is used internally, but can be sold externally, the value of this CGU can be determined
5. CGU should be identified consistently from period to period
the carrying amount of any recognised liability
allocating the impairment loss pro rata based on the carrying amount of each asset in the unit
then this should be done
1. Compares the carrying amount of each unit being tested with its recoverable amount and recognises any impairment loss by allocting the loss acress the assets of the unit
2. Identifies the smallest CGU that includes the unit under review and to which a portion of the unallocated coporate asset can be allocated
3. Compares the carrying amount of the larger cash-generating unit, including the portion of the corporate asset, with is allocated amount. Impairment loss is then allocated across the assets of the larger CGU
acquired in a business combination
a fair value less costs of disposal for goodwill, a set of cash flows, goodwill
how internal management monitors the goodwill
the lowest level at which management monitors the goodwill
no impairment loss, impairment of goodwill
1. Internally generated goodwill
2. Unrecognised identifiable net assets
3. Excess value over carrying amount of recognised assets
the end of each reporting period
adjusting the carrying amount of the asset to recoverable amount
allocated pro rata to the assets of the unit, except for goodwill, with the carrying amounts of those assets