IAS 36 Impairment of Assets
The carrying amount of assets will not be greater than the economic benefits projected to be extracted from them in financial position statement.
The amount of economic benefits is the amount recoverable according to terms IAS 36.
An entity is expected to determine at the end of any reporting period if there is any evidence that an asset may be impaired (i.e. its carrying amount may be greater than its recoverable amount). IAS 36 includes a list of the external and internal indicators of impairment. When an indication is provided that an asset may be affected, then the recoverable amount of the asset must be determined.
Indication of impairment (IAS 36)
- Market value declines
- Negative changes in technology, markets, economy, or laws
- Increases in market interest rates.
- Net assets of the company higher than market capitalization.
- Obsolescence or physical damage
- Asset is idle, part of restructuring or held for disposal
- Worse economic performance than expected
IAS 36 refers to all assets except those for which other standards address impairment. The exceptions include inventories, deferred tax assets, assets arising from employee benefits, financial assets within the scope of IFRS 9, investment property measured at fair value, biological assets within the scope of IAS 41, some assets arising from insurance contracts, and non-current assets held for sale.