IAS 16Chapter 9Lesson 1
Impairment (by reference to IAS 36) and compensation from third parties
Step 1 of 8Learning objectives
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IAS 16 has no impairment test of its own: it refers to IAS 36 to determine whether an item of property, plant and equipment is impaired. When a third party (an insurer, for example) compensates the entity for an asset that was impaired, lost or given up, the compensation goes to profit or loss when it becomes receivable; impairment or loss of the asset, compensation and purchase of a replacement are three separate events, accounted for separately.
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Learning objectives
- Identify the situations in an IAS 16 file that require IAS 36 to be applied.
- Calculate an impairment loss from a given recoverable amount and measure its effect on future depreciation.
- Determine when to recognise compensation from a third party.
- Record separately the impairment or loss of the asset, the compensation receivable and the replacement asset.