An asset is impaired when an entity cannot recover its carrying value, either by using or selling it. An entity estimates the recoverable amount of the asset for impairment testing. The recoverable amount is higher than the fair value, fewer costs of disposal (FVLCD), and the value in use (VIU). Value in use is defined as the present value of the future cash flows expected to be derived from an asset or cash-generating unit. Calculating an asset’s value in use incorporates an estimate of expected future cash flows and expectations about possible variations of such cash flows. IAS 36 requires an entity to assess, at the end of each reporting period (either year-end or IAS 34 interim reporting date), whether there is any impairment of an entity’s non-financial assets. IAS 36 requires an annual impairment test when impairment indicators exist for goodwill and intangible assets with indefinite useful lives. For other classes of assets within the standard’s scope, an entity must assess at each reporting date whether there are any indications of impairment. The impairment test only has to be carried out if such indications exist.

Events after the reporting period and information received after it should be considered in the impairment indicator assessment only if they provide additional evidence of conditions at the end of the reporting period. Similarly, the determination of the recoverable amounts of an asset should only consider the information obtained after the reporting date if such information relates to conditions existing as of the reporting period’s end. Judgment of all facts and circumstances is required to make this assessment. As mentioned above, an entity must assess at the reporting date for all.

As mentioned abo, at the reporting date, an entity must assess, for all assets in the scope of IAS 36, whether there are any indicators of impairment. With the recent developments of the pandemic, there are both external and internal sources of information, such as the fall in stock and commodity prices, decrease in market interest rates, manufacturing plant shutdowns, shop closures, reduced demand and selling prices for goods and services, etc., indicating that an asset may be impaired. The entity should also consider how many updates to its assessment are needed to ensure it reflects the most recent facts and circumstances. In addition, IAS 36 requires entities to assess, at each reporting date, whether there is any indication that an impairment loss may no longer exist or may have decreased for all assets other than goodwill. If there is any such indication, the entity must recalculate the asset’s recoverable amount. The standard describes what it notes as‘ reverse indications’ of impairment.


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  • Deloitte. (2022). Impairment of Assets.
  • Ernest & Young. (2021). Applying IFRS IFRS accounting considerations of the Coronavirus pandemic.