The objective of IAS 36 is to ensure that assets are carried at no more than their recoverable amount, and to define how recoverable amount is calculated. IAS 36 to all assets except: inventories (IAS 2) assets arising from construction contracts (IAS 11) deferred tax assets (IAS 12) financial assets (IAS 39) assets held for sale (IFRS 5)
Impairment: An asset is impaired when its carrying amount exceeds its recoverable amount.
Recoverable amount: The higher of an asset's fair value less costs to sell and its value in use:
Fair value: The amount obtainable from the sale of an asset in a bargained transaction between knowledgeable, willing parties.
Value in use: The discounted present value of estimated future cash flows expected to arise from:
the continuing use of an asset, and from
its disposal at the end of its useful life.
At each balance sheet date, review all assets to look for any indication that an asset may be impaired. If there is an indication, then…
the asset’s recoverable amount must be calculated.
If recoverable amount < carrying amount, then reduce carrying amount to recoverable amount
