IAS36 (Impairments)

Question 1

What is an impairment?

Answer 1

A reduction in the recoverable amount of a non-current asset below its carrying amount.

Question 2

What is the recoverable amount?

Answer 2

Higher of fair value less costs and value in use.

Question 3

What is fair value less costs?

Answer 3

Amount an asset could be sold less any direct selling costs.

Question 4

What is value in use?

Answer 4

Present value of the future cash flows arising from n assets continued use, including those resulting from disposal.

Question 5

What are the indicators an asset may be impaired?

Answer 5

A current period operating loss or net cash outflow from operating activities.
A significant decline in fixed assets market value.
Obsolescence or physical damage to a fixed asset.
A significant adverse change in the business or the market.
A management commitment to undertake a significant reorganisation.
Major loss of key employees.
A significant increase in market interest rates.