I

AS36-I
MPAI
RMENT
Anassetissaidtobeimpairedwheni tcarryi
ngamounti nthestat
ementoff inanci
al
posi
tionisabovetherecoverableoftheassetori tscashgenerati
ng uni
t.From ti
meto
ti
meanassetmayhaveacar ryi
ngval uethatisgreaterthani
tsfai
rvaluebutt hi
sisnot
necessari
lyi
mpairmentasthesi tuat
ionmi ghtchangei nthefutur
e.I
mpai r
mentmeanst hat
theassethassuffer
edaper manentl ossinvalue.

Theobj
ecti
veofIAS36I mpai
rmentofasset
sistoensur
ethatasset
sar e‘
car
ri
ed’(
val
ued)
i
nthefi
nancialst
atement
satnomor ethant
heirr
ecover
ableamount .

ScopeofI
AS36

I
AS36appl i
est oal
lasset
s,wi
tht
hef
oll
owi
ngexcept
ionst
hatxxxfcover
edbyot
her
account
ingstandar
ds:

i
nvent
ori
es(
IAS2)
;

def
err
edt
axasset
s(I
AS1
2);

f
inanci
alasset
s(I
FRS9)
;

i
nvest
mentpr
oper
tyhel
datf
airval
ue(
IAS40)
;

non-
cur
rentasset
scl
assi
fi
edashel
dforsal
e(I
FRS5)

KEYDEFI
NITI
ONI
NTHESTANDARD

Recover
abl
eamountofanasseti
sdef
inedast
hehi
gherofi
tsf
airval
uemi
nuscost
sof
di
sposal
,andi
tsval
uei
nuse.

Fai
rval
uei
sthepr
icet
hatwoul
dber
ecei
vedt
osel
lanassetorpai
dtot
ransf
eral
iabi
l
ity
i
nanor
der
lyt
ransact
ionbet
weenmar
ketpar
ti
cipant
satt
hemeasur
ementdat
e.

Val
uei
nusei
sthepr
esentval
ueoff
utur
ecashf
lowsf
rom usi
nganasset
,incl
udi
ngi
ts
event
ualdi
sposal
.

I
mpai
rmentl
ossi
stheamountbywhi
cht
hecar
ryi
ngamountofanasset(
oracash-
gener
ati
nguni
t)exceedsi
tsr
ecover
abl
eamount
.x

Cash-
gener
ati
nguni
t(CGU)ast
hesmal
lesti
dent
if
iabl
egr
oupofasset
sthatgener
ates
cashinf
lowst
hatar
elar
gel
yindependentoft
hecashi
nfl
owsf
rom ot
herasset
sorgr
oups
ofasset
s.

I
dent
if
yingI
mpai
rmenti
nanAsset

Accor
dingt
othest
andar
danent
it
ymustcar
ryouti
mpai
rmentr
evi
ewwhent
her
eisan
evi
denceorindi
cationthatimpairmentmighthaveoccurr
ed.Thestandar
dhasgi vensome
l
eadastot hei
ndicatorthatimpairmenti
nanassethasoccurred.Thesei
ndi
catorscanbe
fr
om wit
hintheenti
tyitself
(I
nternalSour
ces)orfr
om fact
orsoutsi
detheent
it
y( Exter
nal
sour
ces)

EXTERNALI
NDI
CATOROFI
MPAI
RMENT

1
.Unexpect
eddecl
inei
nthemar
ketval
ueofanasset

2.Signi
fi
cantchangesi
ntechnol
ogy,mar
ket
,economi
c,l
awandr
egul
ati
onst
hathavean
adverseeff
ectonthecompany

3.I
ncr
easei
nint
erestr
ateaf
fect
ingt
heval
uei
nuseoft
heasset

4.Thecompanynetasset
shaveacar
ryi
ngval
uehi
ghert
hant
hemar
ketcapi
tal
isat
ionof
thecompany.

I
NTERNALI
NDI
CATOROFI
MPAI
RMENT

1
.Evi
dencet
hatt
heasseti
sdamagedornol
ongerofuset
otheent
it
y

2.Ther
eareplant
orest
ruct
ureordi
scont
inuet
heoper
ati
onf
orwhi
cht
heasseti
s
curr
ent
lyused

3.Ther
eisr
educt
ioni
ntheasset
'sexpect
edr
emai
ningusef
ull
if
e

I
fther
eisani
ndi
cati
onthatanasset(orcash-generat
inguni
t)i
simpai
redtheniti
s
test
edf ori
mpai
rment
.Thi
sinvol
vesthecalculat
ingtherecover
ableamountoft
heitem i
n
questi
onandcompari
ngthist
oitscar
ryingamount .

Measur
ingr
ecover
abl
eamount

I
thasbeenexpl
ainedt
hatr
ecover
abl
eamounti
sthehi
gherofanasset
’s:

f
airval
uel
esscost
sofdi
sposal
;and

i
tsval
uei
nuse.

I
feit
heroftheseamountsi
shigherthant
hecar
ryi
ngvalueoftheasset
,therehasbeenno
i
mpairment
.IAS36setsouttherequir
ement
sformeasuri
ng‘f
airval
uelesscostsof
di
sposal
’and‘val
ueinuse’
.

Measur
ingf
airval
uel
esscost
sofdi
sposal

Fai
rval
uei snor
mallymar ketvalue.I
fnoactivemarketexist
s,i
tmaybepossiblet o
est
imatetheamountt hattheent i
tycoul
dobt ai
nfr
om thedisposal
.Dir
ectsell
ingcost
s
normal
lyincl
udelegalcosts,taxesandcostsnecessarytobr i
ngtheasseti
ntoaconditi
on
tobesold.However,redundancyandsi mil
arcosts(forexample,wher
eabusi ness
r
eor
gani
sedf
oll
owi
ngt
hedi
sposalofanasset
)ar
enotdi
rectsel
li
ngcost
s.

Cal
cul
ati
ngval
uei
nuse

Valueinusei
savaluet hatrepr
esent
sthepresentvalueoft
heexpectedfut
urecashfl
ows
fr
om useoftheasset,discount
edatasui
tablediscountr
ateorcostofcapi
tal
.Valuei
nuse
i
st her
efor
ecalcul
atedby:

estimati
ngfutur
ecashfl
owsfr
om theuseoft
heasset(
incl
udi
ngt
hosef
rom ul
ti
mat
e
disposal
).di
scount
ingt
hem t
opresentval
ue.

Esti
matesoffutur
ecashflowsshouldbebasedonr easonabl
eandsuppor
tabl
e
assumpti
onsthatrepr
esentmanagement’sbestesti
mat eoft
heeconomiccondi
ti
onst
hat
wil
lexi
stovertheremaini
ngusefull
if
eoftheasset.

Thediscountrateusedshouldbetherateofretur
nt hatt
hemar ketwoul
d expectfrom an
equall
yriskyi
nvestment.However,bot
ht heexpectedfutur
ecashf l
owsandthedi scount
rat
emi ghtbeadjustedtoal
lowforuncertai
ntyaboutthefutur
e–suchast hebusinessr i
sk
associ
atedwiththeassetandexpectati
onsofpossiblevari
ati
onsintheamountort iming
ofexpectedfuturecashbenefi
tsf
rom usingtheasset.

Account
ingf
ori
mpai
rment
Theimpai rmentlossisnor mall
yrecognisedimmedi at
elyinprof
itorloss.However ,an
i
mpai r
mentl ossrecogni sedinrespectofanassetcarriedatapr eviousl
yr ecognised
reval
uat i
onsurpl
usi srecognisedinot hercomprehensiveincomet ot heextentthati ti
s
coveredbyt hatsurplus.Thusi ti
streatedinthesamewayasadownwar dr eval
uat ion,
reducingtherevaluati
onr eservebalancer el
ati
ngtothatassetinthest at
ementofchanges
i
nequi ty.Impai
rmentnotcover edbyapr eviousl
yrecognisedsurplusont hesameasseti s
recognisedinprofitorloss.

DR:P/
L(orOCI
)

CR:PPE

CASHGENERATI
NGUNI
TANDI
MPAI
RMENT

I
tisnotal
wayspossibl
et ocalcul
atetherecoverabl
eamountofi ndi
vidualasset
s.Val
uein
useoft
enhast obecal
culatedforgroupsofassets,becauseassetsmaynotgener at
e
cashfl
owsinisol
ati
onfrom eachother.Anassetthatispotent
ial
lyimpair
edmaybepar tof
alar
gergroupofasset
swhi chform acash-generat
ingunit.
I
AS36def inesacash-gener at
inguni
t(CGU)ast hesmall
estident
if
iabl
egroupofasset
s
thatgeneratescashinfl
owst hatar
elargel
yindependentofthecashinf
lowsfr
om ot
her
assetsorgr oupsofassets.

Goodwi
ll

Theexi stenceofcash- generat

inguni
tsmaybepar t
icul
arlyrel
evanttogoodwi l
lacquir
ed
i
nabusi nesscombi nati
on.Purchasedgoodwi l
lmustber evi
ewedf orimpair
mentannually,
andt hevalueofgoodwi l
lcannotbeesti
mat edini
solati
on.Of t
en,goodwillr
elat
estoa
wholebusi ness.I
tmaybepossi bl
etoall
ocatepurchasedgoodwi l
lacrossseveralcash-
gener at
ingunits.I
fallocati
onisnotpossi
ble,thei
mpai r
mentr evi
ewi scarri
edoutintwo
stages:

1Carr
youtanimpairmentrevi
ewoneachoft hecash-gener
ati
nguni
ts(
excl
udi
ngt
he
goodwil
l)andr
ecogniseanyimpai
rmentl
ossesthathaveari
sen.

2Thencar
ryoutani
mpai
rmentr
evi
ewf
ort
heent
it
yasawhol
e,i
ncl
udi
ngt
hegoodwi
ll
.

Al
locat
ingani
mpai
rmentl
osst
otheasset
sofacashgener
ati
nguni
t.

Whenanimpai
rmentlossar
isesonacash-gener
ati
ngunit,thei
mpai
rmentl
ossi
sal
locat
ed
acr
osst
heassetsoft
hecash- gener
ati
nguni
tinthefol
lowingor
der
:

I
nli
newi
thI
AS36-I
mpai
rment
,fi
rstt
othegoodwi
llal
locat
edt
othecashgener
ati
nguni
t;

Der
ecogniseanyoft
heasset
sthatcausedthetot
all
ossorthatar
especi
fi
cal
lyi
mpairedto
t
heextentthati
tnol
ongermeet
sther ecogni
ti
oncri
ter
iai
nli
newithI
AS16-PPE( i
fther
e
i
sany)
;

Next
,tot
heot herasset
sint
hecash-gener
ati
ngunit,onapro-
ratabasi
s(i
.e.i
npr
opor
ti
on
t
othecarr
yingamountoftheasset
softhecashgenerat
inguni
t).

NOTE:Al
lmonet
aryasset
smustnotbei
mpai
red

However
,thecar
ryi
ngamountofanassetcannotber
educedbel
owt
hehi
ghestof
:

1
.it
sfai
rval
uel
esscost
sofdi
sposal(
ifdet
ermi
nabl
e);

2.i
tsval
uei
nuse(
ifdet
ermi
nabl
e);and
3.zer
o.

Rever
salofani
mpai
rmentl
oss

Acompanymustmakeanassessmentatt heendofeachreport
ingper
iodast owhethera
pr
eviousl
yrecogni
sedimpai
rmentshouldbeincreasedormaynolongerexist.I
fthel
oss
nolongerexi
stsi
tisr
ever
sedsubjectt
ot hefol
lowinggui
dance.
Anyreversal:

-mustbej
ust
if
iabl
e,byr
efer
encet
oani
mpr
ovementi
nthei
ndi
cat
orsofi
mpai
rment
;and

-shoul
dnotleadt
oacar r
yingamountinexcessofwhatthecarr
yingamountoft
heasset
wouldhavebeenwit
houttherecogni
ti
onoftheori
ginali
mpair
mentloss.

Ar
ever
salshoul
dbe:

r
ecognisedimmedi at
elyi
nprof
itorloss;unl
esstheorigi
nalimpair
mentwaschargedtot
he
r
evaluat
ionreserve,i
nwhichcasether ever
salshoul
dbecr edit
edtothereval
uat
ion
r
eserve(andreportedint
hesamewayasar eval
uati
onin‘othercomprehensi
vei
ncome’
f
ortheperiod).

Depreci
ati
onchargesforfut
ureperi
odsshouldbeadjust
edtoall
ocatetheasset
’sr
evi
sed
car
ryingamount
,mi nusanyresi
dualval
ue,overi
tsr
emainingusefull
if
e.

Animpairmentlossthathasarisenonpur chasedgoodwillcannotberever
sed.Thisi
s
becauseanyreversalofanimpai r
mentlosst ogoodwil
lisli
kelytobecausedbyan
i
ncreaseinint
ernall
y-generat
edgoodwi llrat
herthanareversaloftheimpai
rmentof
purchasedgoodwill
.Int
ernall
y-gener
atedgoodwi llmustnotber epor
tedasanasset.

Di
scl
osur
eRequi
rement
soft
heSt
andar
d.

1
.Theamountofi
mpai
rmentr
ecogni
sedur
ingt
heper
iod.

2.
Howt
her
ecover
abl
eamountwasder
ived

3.I
nfor
mat
ionont
her
ever
salofi
mpai
rmentl
ossi
fany

4.Howt
hedi
scountr
ateusedi
ncal
cul
ati
ngval
uei
nusewasder
ived

5.Thebasi
susedi
ndet
ermi
ningf
airval
ue

6.Theevent
sandci
rcumst
ancest
hatl
edt
oimpai
rment

7.Adescri
pti
onoft
heCGU,t
heamountofi
mpai
rmentr
ecogni
sedorr
ever
sedf
oreach
cl
assofasset
s.