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Feb 28, 2024 · In accounting, impairment is a permanent reduction in the value of a company asset. It may be a fixed asset or an intangible asset . When testing an asset for...
International Accounting Standard 36 Impairment of Assets (as revised in 2004) was approved for issue by eleven of the fourteen members of the International Accounting Standards Board. Messrs Cope and Leisenring and Professor Whittington dissented. Their dissenting opinions are set out after the Basis for Conclusions.
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IAS 36 Impairment of Assets seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. the higher of fair value less costs of disposal and value in use). With the exception of goodwill and certain intangible assets for which an annual impairment test is required, entities are required to conduct ...
Jan 2, 2024 · The impairment definition refers to a permanent fall in an asset’s value. The asset may be an intangible asset or a fixed one. The decrease typically happens due to internal and external factors, like a change in the legal climate, increased competition, physical damage to the asset, etc.
The core principle in IAS 36 is that an asset must not be carried in the financial statements at more than the highest amount to be recovered through its use or sale. If the carrying amount exceeds the recoverable amount, the asset is described as impaired.
The aim of the impairment test is to define the recoverable amount of the asset tested and adjust carrying amount accordingly, to make sure the carrying amount of the assets presented in an entity’s balance sheet is not higher than their recoverable amount.
IAS 36 Impairment of Assets prescribes the procedures to apply to ensure assets are carried at no more than their recoverable amount. Applying IAS 36 Impairment of Assets. This factsheet provides a summary of the basic principles of accounting for impairments and practical tips on application. View the factsheet. Access the standard.
