Impairment of assets (IAS 36)

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Impairment of assets (IAS 36) by Mind Map: Impairment of assets (IAS 36)

1. Impairment exists if carrying amount > recoverable amount (HIGHER OF fair value-costs to sell or value in use)

2. Indications of Impairments

2.1. Internal sources

2.1.1. Obsolescence / damage

2.1.2. Changes to way asset used

2.1.3. Evidence that performance of asset worse than expected

2.2. External sources

2.2.1. Market value decrease.

2.2.2. Changes in market affect entity adversely.

2.2.3. Interest rates change

3. Measurement of impairment and recognition

3.1. Impairment = carrying value - recoverable amount

3.2. Write down asset

3.3. Recognise loss in statement of profit or loss unless asset previously revalued.

4. Impairment of CGUs

4.1. CGU = Group of assets generating cash inflows.

4.2. Perform impairment test for CGU (Using total carrying value and recoverable amount for all assets in CGU)

4.3. Allocate impairment to any obviously impaired asset then to goodwill then prorate to other assets