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PAS 36 Concept Map

Events or changes that could lead to impairment of assets include external sources like changes in the discount rate or evidence of obsolescence, and internal sources like decreases in cash flows or significant changes in the technological environment. The recoverable amount is the higher of an asset's fair value less costs to sell or its value in use. Impairment occurs when an asset's carrying amount exceeds its recoverable amount, and it is recognized in profit or loss. Annual impairment tests are required for certain intangible assets and cash-generating units to which goodwill has been allocated. Impairment of goodwill is never reversed.

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570 views

PAS 36 Concept Map

Events or changes that could lead to impairment of assets include external sources like changes in the discount rate or evidence of obsolescence, and internal sources like decreases in cash flows or significant changes in the technological environment. The recoverable amount is the higher of an asset's fair value less costs to sell or its value in use. Impairment occurs when an asset's carrying amount exceeds its recoverable amount, and it is recognized in profit or loss. Annual impairment tests are required for certain intangible assets and cash-generating units to which goodwill has been allocated. Impairment of goodwill is never reversed.

Uploaded by

Micah Ramayka
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© © All Rights Reserved
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Events or changes that could lead to impairment of assets (not exhaustive):

External Sources
Discount Rate
Current
pre-tax
rate
Risks
specific to
the asset

Evidence or
obsolescence
or physical
damage of an
asset
Discontinuan
ce, disposal
or
restructuring
plans
Worsening of
the economic
performance

It is measured as the present value or discounted


value of future net cash flows (inflows minus outflows) expected to
be derived from the asset.

Internal Sources
Cash Flows:

Continuing use of
the asset
Disposal of the asset
Pre-tax

Incremental
cost directly attributable to
the disposal of the asset,
except finance cost and
income tax expense

It is the price that would be


received to sell an asset or paid to
transfer a liability in an orderly
transaction between market
participants at the measurement date.

RECOVERABLE AMOUNT = Higher of fair value less costs to sell and value in use, whichever is higher

Significant
decrease or
decline in market
value
Significant
changes in
technological,
market, legal or
economic
environment
Changes in
interest rates
Carrying amount

Recognition

ANNUAL IMPAIRMENT TESTS

Intangible assets with an


indefinite useful life
Intangible assets not yet
available for use
CGUs to which goodwill has
been allocated

IMPAIRMENT = Carrying amount > Recoverable amount

IMPAIRMENT OF ASSETS
PAS 36

Definition: Impairment is a fall in the market value of an


asset so that the recoverable amount is now less than
the carrying amount in the statement of financial position.
Cash Generating unit (CGU) is the smallest identifiable
group of assets that generate cash inflows from continuing
use that are largely independent of the cash inflows from
the other assets or group of assets.

REVERSAL OF IMPAIRMENT:

Individual Asset recognized in profit/loss


unless carried at revalued
amount
CGUs allocated to assets of CGU on a prorata basis
Goodwill Impairment is never reversed

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