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Scope exclusions

Inventories

Assets arising from construction contracts

Financial asset IAS 39

Investment property @ fair value

IAS 16

Other assets of standards with impairment

provisions e.g. financial instruments

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Impairment

Definition

A (sudden) loss in the value of an asset over andabove the systematic recognition of the loss of the

assets value through depreciation.

--Loss = recoverable amount < carrying value

--In net surplus or deficit

--After impairment adjust depreciation charge

--Recognize a liability if required by another standard

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Recoverable amount

Definition

Higher of

Fair value less costs to sell and value in use

Recoverable service amount

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Cash-generating assets

Definition

Assets held with the primary objective ofgenerating a commercial rate of return

Cash incidental

Indistinguishable

Consistency with for-profit entitiesMay not meet that objective every year

Primary purpose

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Non-cash-generating assets

Assets other than cash-generating assets.

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Discount rate

Pre-tax

Asset specific or surrogate

Time value of money

Risks specific to the assets for which the

cash flows have not been adjusted

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Other Key Terms

Carrying value of asset

Active market

Costs of disposal / selling

Fair value

Useful / Estimated life Exit Value

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Indicators of impairment

Cash-generating Units External Indicators / factors

1. Unexpected decline in market value

2. Significant adverse changes in technology,

market, economic or legal environment3. Increase in market rates of interest or rate of

return

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Indicators of impairment

Internal

1. Obsolete or physical damage

2. Significant adverse changes in entity and

way in which asset will be used

3. Economic performance worse than expected

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Indicators of impairment

Non-cash-generating External

1. Cessation (near) of demand for services

2. Significant adverse changes in technology,

market, economic or legal environment

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Indicators of impairment

Internal

1. Obsolete or physical damage2. Significant long term adverse changes in

entity and way in which asset will be used

3. Halt construction before finish

4. Service performance worse than expected

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Measuring recoverable amount

Fair value

Active market Binding arrangement

Value in use

Individual assets

Unless dependent on cash flows from otherassets or group of assets

Recoverable amount of cash-generating unit

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Intangible asset with an indefinite usefullife

Test annually for impairment

Irrespective of any indicator of impairment Test even if it belongs to a CGU where there has

been no significant changes

Most recent calculation of recoverable amount

exceeded carrying value by a substantial amount

Analysis of events and circumstances indicate

impairment is remote

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Flowcharts

Is an Asset Impaired?

How is an Impairment Loss Recognized?

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When do you test for impairment?

At each reporting date

If an indicator has been triggered. If no trigger, no further work required on

impairment

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Identify CGU to which an asset belongs

Assess individual asset first

If asset does not generate cash flowsindependently from other assets

Smallest group of assets which generatescash flows largely independent from otherassets or groups of assets

Consistency from period to period for thesame assets( unless change is justified)

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Impairment loss forCGU

Recoverable amount of CGU < carrying amount of

CGU Allocate loss to assets in unit on a pro-rata basis

Carrying amount of an asset shall not be20reduced

below the highest of:

Fair value less costs to sell

Value in use (if determinable)

Zero

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Reversal of impairment loss

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Only if indicators of impairment no longer

exists

Reverse only if there has been a change

in the estimates

Increase carrying amount to recoverable

amount Increase shall not exceed carrying amount

if no impairment existed

Adjust depreciation

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Disclosure

Criteria to distinguish between cash & non-cashImpairment losses and reversals per class of asset

And Also for each segment For each material loss:

Event & circumstances

Amount

Nature of asset or CGU

Basis used to determine FV

Discount rate used for value in use

Assumptions used (optional)

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Your Turn

Questions?

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THANK YOU