IAS 36 · Workpapers (Step 4 of 5)
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Reversal of an impairment loss
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- Not reviewed — human review required
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- Published
Objective of the workpaper
Check that there is an indication of reversal and a change in estimates (not only the unwinding of the discount), cap the carrying amount at the amount that would have existed without the prior loss, allocate the reversal between profit or loss and other comprehensive income according to the history of the asset, record it and recalculate the future charge. A goodwill loss is never reversed.
11 sections · 26 blocks · 5 calculations · 3 entries
- IAS 36 §110
- IAS 36 §111
- IAS 36 §113
- IAS 36 §114
- IAS 36 §115
- IAS 36 §116
- IAS 36 §117
- IAS 36 §118
- IAS 36 §119
- IAS 36 §120
- IAS 36 §121
- IAS 36 §122
- IAS 36 §123
- IAS 36 §126
- IAS 36 §130
Work this workpaper as a mission
Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.
2 instances from the cases: the calculations and entries below are run by the calculation engine.
- File and entity
- Revalued asset: IAS 16 revaluation, then IAS 36 impairment loss and capped reversal
- Case tasks documented here
- Is a reversal justified at 31 December 20X3?
- Determine the recoverable amount and the cap on the reversal at 31 December 20X3.
- Calculate the reversal and its allocation.
- Which reversal entries do you record at 31 December 20X3?
- Calculate the depreciation charge for 20X4.
Inputs
InputsAsset or unit whose prior loss is examined (impairment history)
TextRequired
Reporting date
DateRequired
20X3-12-31
Carrying amount before the reversal
NumberRequired
1,332,000
New recoverable amount
NumberRequired
1,600,000
Carrying amount that would have existed without the prior loss, net of depreciation
NumberRequired
1,440,000
Revaluation surplus of the asset before the reversal (0 under the cost model)
NumberRequired
0
Prior losses recognised in profit or loss and not yet reversed
NumberRequired
94,000
Residual value
NumberRequired
0
Remaining useful life after the reversal
NumberRequired
18 years
Supporting evidence
EvidenceEvidence obtained and referenced (category, document reference)
EvidenceRequired
Indications and conditions for a reversal
AnalysisIAS 36 §110IAS 36 §111IAS 36 §113IAS 36 §114IAS 36 §115IAS 36 §116
Conditions verified before any reversal
ChecklistRequired
- Indication of reversal assessed at the reporting date (external and internal sources)
- Change in the estimates used for the recoverable amount identified
- Increase not due to the unwinding of the discount only
- Life, depreciation method and residual value reviewed
Reversal for a unit
AnalysisIAS 36 §122IAS 36 §123
Allocation rules for a unit reversal
Checklist
- Reversal allocated to the assets other than goodwill, pro rata to their carrying amount
- Each asset capped at the lower of its recoverable amount and its amount without loss
Capped reversal and allocation
CalculationsIAS 36 §117IAS 36 §118IAS 36 §119IAS 36 §120IAS 36 §121
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss)
CalculationRequired
1,440,000
New recoverable amount ; Carrying amount that would have existed without the prior loss, net of depreciation
An increase above the amount without the prior loss is not a reversal: it would be a revaluation under the standard applicable to the asset (para. 118).
Total reversal
CalculationRequired
108,000
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in profit or loss (up to prior losses in profit or loss)
CalculationRequired
94,000
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in other comprehensive income (revalued asset)
CalculationRequired
14,000
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Annual depreciation after the reversal
CalculationRequired
80,000
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Residual value ; Remaining useful life after the reversal
Journal entries
EntriesReversal in profit or loss
Entry
Account Debit Credit Accumulated impairment 94,000 Reversal of impairment loss 94,000 Reversal credited to the revaluation surplus
Entry
Account Debit Credit Accumulated impairment 14,000 Revaluation surplus (OCI) 14,000 Depreciation for the first period after the reversal
Entry
Account Debit Credit Depreciation expense 80,000 Accumulated depreciation 80,000
Whether a reversal is justified
JudgmentIAS 36 §110IAS 36 §114IAS 36 §116
Conclusion on the reversal
JudgmentRequired
Indication and change in estimates: reversal to be recognised
Indication and change in estimates: reversal to be recognised / No change in estimates (or unwinding only): no reversal
Rationale: facts relied on, analysis, alternative rejected
TextRequired
Conclusion
ConclusionConclusion on the reversal, its allocation and the future charge
ConclusionRequired
Financial statement impact
FS impactImpact by caption, derived from the entries above (the Notes line refers to the disclosures)
TableRequired
Disclosures
DisclosureIAS 36 §126IAS 36 §130
Disclosures on the reversal
ChecklistRequired
- Reversals by class: in profit or loss (line item) and in other comprehensive income
- Events leading to the reversal, amount, recoverable amount and its basis
Normative references
ReferencesParagraphs cited in this workpaper (verification status shown from the register)
References
Checks and financial statement impact
- The reversal cap is determinedPass
- The reversal equals the sum of the profit or loss and OCI partsPass
- The profit or loss reversal entry is balancedPass
- The OCI reversal entry is balancedPass
- The depreciation entry is balancedPass
- Assets
- 28,000
- Liabilities
- 0
- Profit or loss
- 14,000
- OCI
- 14,000
- Equity
- 28,000
- File and entity
- Professional file: annual impairment review of an industrial group
- Case tasks documented here
- Calculate the reversal of the impairment loss of line M7 and its future depreciation.
- Which entries do you record at 31 December 20X5?
Inputs
InputsAsset or unit whose prior loss is examined (impairment history)
TextRequired
Reporting date
DateRequired
20X5-12-31
Carrying amount before the reversal
NumberRequired
400,000
New recoverable amount
NumberRequired
650,000
Carrying amount that would have existed without the prior loss, net of depreciation
NumberRequired
600,000
Revaluation surplus of the asset before the reversal (0 under the cost model)
NumberRequired
0
Prior losses recognised in profit or loss and not yet reversed
NumberRequired
280,000
Residual value
NumberRequired
0
Remaining useful life after the reversal
NumberRequired
5 years
Supporting evidence
EvidenceEvidence obtained and referenced (category, document reference)
EvidenceRequired
Indications and conditions for a reversal
AnalysisIAS 36 §110IAS 36 §111IAS 36 §113IAS 36 §114IAS 36 §115IAS 36 §116
Conditions verified before any reversal
ChecklistRequired
- Indication of reversal assessed at the reporting date (external and internal sources)
- Change in the estimates used for the recoverable amount identified
- Increase not due to the unwinding of the discount only
- Life, depreciation method and residual value reviewed
Reversal for a unit
AnalysisIAS 36 §122IAS 36 §123
Allocation rules for a unit reversal
Checklist
- Reversal allocated to the assets other than goodwill, pro rata to their carrying amount
- Each asset capped at the lower of its recoverable amount and its amount without loss
Capped reversal and allocation
CalculationsIAS 36 §117IAS 36 §118IAS 36 §119IAS 36 §120IAS 36 §121
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss)
CalculationRequired
600,000
New recoverable amount ; Carrying amount that would have existed without the prior loss, net of depreciation
An increase above the amount without the prior loss is not a reversal: it would be a revaluation under the standard applicable to the asset (para. 118).
Total reversal
CalculationRequired
200,000
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in profit or loss (up to prior losses in profit or loss)
CalculationRequired
200,000
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in other comprehensive income (revalued asset)
CalculationRequired
0
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Annual depreciation after the reversal
CalculationRequired
120,000
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Residual value ; Remaining useful life after the reversal
Journal entries
EntriesReversal in profit or loss
Entry
Account Debit Credit Accumulated impairment 200,000 Reversal of impairment loss 200,000 Reversal credited to the revaluation surplus
Entry
Debit Accumulated impairment ← Reversal in other comprehensive income (revalued asset) ; Credit Revaluation surplus (OCI) ← Reversal in other comprehensive income (revalued asset)
Depreciation for the first period after the reversal
Entry
Account Debit Credit Depreciation expense 120,000 Accumulated depreciation 120,000
Whether a reversal is justified
JudgmentIAS 36 §110IAS 36 §114IAS 36 §116
Conclusion on the reversal
JudgmentRequired
Indication and change in estimates: reversal to be recognised
Indication and change in estimates: reversal to be recognised / No change in estimates (or unwinding only): no reversal
Rationale: facts relied on, analysis, alternative rejected
TextRequired
Conclusion
ConclusionConclusion on the reversal, its allocation and the future charge
ConclusionRequired
Financial statement impact
FS impactImpact by caption, derived from the entries above (the Notes line refers to the disclosures)
TableRequired
Disclosures
DisclosureIAS 36 §126IAS 36 §130
Disclosures on the reversal
ChecklistRequired
- Reversals by class: in profit or loss (line item) and in other comprehensive income
- Events leading to the reversal, amount, recoverable amount and its basis
Normative references
ReferencesParagraphs cited in this workpaper (verification status shown from the register)
References
Checks and financial statement impact
- The reversal cap is determinedPass
- The reversal equals the sum of the profit or loss and OCI partsPass
- The profit or loss reversal entry is balancedPass
- The OCI reversal entry is balancedNot evaluated
- The depreciation entry is balancedPass
- Assets
- 80,000
- Liabilities
- 0
- Profit or loss
- 80,000
- OCI
- 0
- Equity
- 80,000
Inputs
InputsAsset or unit whose prior loss is examined (impairment history)
TextRequired
Reporting date
DateRequired
Carrying amount before the reversal
NumberRequired
New recoverable amount
NumberRequired
Carrying amount that would have existed without the prior loss, net of depreciation
NumberRequired
Revaluation surplus of the asset before the reversal (0 under the cost model)
NumberRequired
Prior losses recognised in profit or loss and not yet reversed
NumberRequired
Residual value
NumberRequired
Remaining useful life after the reversal
NumberRequired
Supporting evidence
EvidenceEvidence obtained and referenced (category, document reference)
EvidenceRequired
Indications and conditions for a reversal
AnalysisIAS 36 §110IAS 36 §111IAS 36 §113IAS 36 §114IAS 36 §115IAS 36 §116
Conditions verified before any reversal
ChecklistRequired
- Indication of reversal assessed at the reporting date (external and internal sources)
- Change in the estimates used for the recoverable amount identified
- Increase not due to the unwinding of the discount only
- Life, depreciation method and residual value reviewed
Reversal for a unit
AnalysisIAS 36 §122IAS 36 §123
Allocation rules for a unit reversal
Checklist
- Reversal allocated to the assets other than goodwill, pro rata to their carrying amount
- Each asset capped at the lower of its recoverable amount and its amount without loss
Capped reversal and allocation
CalculationsIAS 36 §117IAS 36 §118IAS 36 §119IAS 36 §120IAS 36 §121
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss)
CalculationRequired
New recoverable amount ; Carrying amount that would have existed without the prior loss, net of depreciation
An increase above the amount without the prior loss is not a reversal: it would be a revaluation under the standard applicable to the asset (para. 118).
Total reversal
CalculationRequired
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in profit or loss (up to prior losses in profit or loss)
CalculationRequired
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Reversal in other comprehensive income (revalued asset)
CalculationRequired
Carrying amount before the reversal ; Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Revaluation surplus of the asset before the reversal (0 under the cost model) ; Prior losses recognised in profit or loss and not yet reversed
Annual depreciation after the reversal
CalculationRequired
Carrying amount after the reversal (lower of the recoverable amount and the amount without loss) ; Residual value ; Remaining useful life after the reversal
Journal entries
EntriesReversal in profit or loss
Entry
Debit Accumulated impairment ← Reversal in profit or loss (up to prior losses in profit or loss) ; Credit Reversal of impairment loss ← Reversal in profit or loss (up to prior losses in profit or loss)
Reversal credited to the revaluation surplus
Entry
Debit Accumulated impairment ← Reversal in other comprehensive income (revalued asset) ; Credit Revaluation surplus (OCI) ← Reversal in other comprehensive income (revalued asset)
Depreciation for the first period after the reversal
Entry
Debit Depreciation expense ← Annual depreciation after the reversal ; Credit Accumulated depreciation ← Annual depreciation after the reversal
Whether a reversal is justified
JudgmentIAS 36 §110IAS 36 §114IAS 36 §116
Conclusion on the reversal
JudgmentRequired
Indication and change in estimates: reversal to be recognised / No change in estimates (or unwinding only): no reversal
Rationale: facts relied on, analysis, alternative rejected
TextRequired
Conclusion
ConclusionConclusion on the reversal, its allocation and the future charge
ConclusionRequired
Financial statement impact
FS impactImpact by caption, derived from the entries above (the Notes line refers to the disclosures)
TableRequired
Disclosures
DisclosureIAS 36 §126IAS 36 §130
Disclosures on the reversal
ChecklistRequired
- Reversals by class: in profit or loss (line item) and in other comprehensive income
- Events leading to the reversal, amount, recoverable amount and its basis
Normative references
ReferencesParagraphs cited in this workpaper (verification status shown from the register)
References