📖 Overview
This standard requires that assets (with certain exceptions) be tested for impairment when there are indications that their carrying amount may not be recoverable. An impairment loss is measured as the difference between carrying amount and recoverable amount (higher of fair value less costs to sell and value in use).
🎯 Scope
This standard applies to the accounting treatment for impairment of assets, except:
- Inventory (IAS 2).
- Assets arising from customer contracts (IFRS 15).
- Deferred tax assets (IAS 12).
- Financial assets (IFRS 9).
- Investment property measured at fair value (IAS 40).
- Biological assets measured at fair value (IAS 41).
⚙️ Key Principles
1. **Recoverable Amount**: The higher of (fair value less costs to sell) and (value in use).
2. **Value in Use**: The present value of future cash flows expected to be derived from the asset.
3. **Impairment Loss**: The difference between the asset's carrying amount and its recoverable amount.
4. **Cash Generating Unit (CGU)**: The smallest identifiable group of assets that generates independent cash inflows.
📏 Measurement
**Value in Use:**
- Estimate future cash flows.
- Select an appropriate discount rate that reflects risks.
**Fair Value less Costs to Sell:**
- Market price if an active market exists.
- Other valuation techniques if no active market exists.
**Impairment Loss:**
- Measured as the difference between carrying amount and recoverable amount.
✅ Recognition
**Impairment Indicators:**
- **External**: Significant decline in market value, adverse technological or legal changes.
- **Internal**: Physical obsolescence, cessation of part of the asset, economic performance worse than expected.
**Recognition of Impairment Loss:**
- Reduces the carrying amount of the asset.
- Recognized as an expense in the income statement.
- For goodwill, annual testing is mandatory.
📊 Presentation
**On the Statement of Financial Position:**
- Assets are shown at carrying amount after impairment.
**On the Income Statement:**
- Impairment losses appear within operating expenses or as a separate expense.
**Reversal of Impairment Loss:**
- Reversed if estimates change.
- Goodwill impairment cannot be reversed.
- Reversal is recognized in the income statement.
📝 Disclosure Requirements
Disclosures required:
- Impairment losses recognized or reversed during the period.
- Assets or CGUs affected.
- Reasons for the impairment.
- Recoverable amount (with explanation of valuation basis).
- Key assumptions used in value in use calculation.
- Discount rates used.
🔗 Related Standards
IAS 16 (Property, Plant and Equipment), IAS 38 (Intangible Assets), IFRS 3 (Business Combinations)