313 / 488
28
IMPAIRMENT OF ASSETS (l AS 36 )
1. SCOPE
1.1
The purpose of the Standard is to ensure that assets are carried at no more than their recover–
able amount. If an asset's carrying value exceeds the amount that could be received through use or
through selling the asset, then the asse t is impaired and lAS 36 requires an entity to make provision
for the impairment loss. lAS 36 also sets out the situations where an entity can reverse an impair–
ment loss. Certain assets are not covered by the Standard, including
• Inventories (lAS 2)
• Assets arising from construction contrac ts (lAS 11)
• Deferred tax assets (lAS 12)
• Assets arising from employee benefits (lAS 19)
• Financial assets dealt with under lAS 39
• Investment property carried at fair value under lAS 40
• Biological assets carried at fair value (lAS 41)
• Assets arising from insurance contracts (IFRS 4)
• Assets that are held for sale (lFRS 5)
1.2 The Standard does apply to
• Subsidiaries, associates, and joint ventures
• Property, plant, and equ ipment
• Investment property carried at cost
• Intangible assets and goodwill
2. DEFINITION OF KEY TERMS (in accordance with lAS 36)
Recoverable amount of an asse t or a cash-generating unit. The higher of its fair value less
costs to sell and its value in use.
Value-in-use . The discounted present value of the future cash flows expected to arise from an
asset or a cash-generating unit.
Cash-genera ting unit. The smallest group of assets that can be identified that generates cash
flows independently of the cash flows from other assets.
Fair value less costs to sell. The amount obtainable from the sale of an asset or cash–
generating unit in an arm's-lengt h transaction between knowledgeable, willing parties, less the
costs of disposal.
Impai rment loss. The amount by which the carrying amount of an asset or cash-generating
unit exceeds its recoverable amount.
3. IDENTI FYING AN IMPAIRMENT LOSS
3.1 An entity has to assess at each balance sheet date whether there is any indication that an asset
is impaired.
3.2 Additionally, even if there is no indication of any impairment, these assets should be tested
for impairment:
• An intangible asset that has an indefin ite useful life
• An intangible asset that is not yet available for use
• Goodwi ll that has been acquired in a business combination
3.3 lAS 36 sets out the events that might indicate that an asset is impaired . These are