Impairment review

Learning objectives

• Assess whether an impairment test is needed after the increase in carrying amount resulting from a repayment.L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Impairment review after repayment of an asset grant" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 20 §33Circumstances giving rise to the repayment of a grant related to an asset may require consideration of possible impairment of the new carrying amount of the asset.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• An asset grant, deducted from the asset's carrying amount, becomes repayable, which raises the asset's carrying amount. Which of these statements are accurate? (More than one answer possible.)L3
• Rolland acquired an asset costing {asset_cost} and deducted a grant of {grant_amount} from its carrying amount. Useful life: {useful_life} years, straight-line depreciation with no residual value (case conventions). After {years_elapsed} year, the grant becomes repayable in full. Calculate the catch-up depreciation, then the carrying amount to compare, in the impairment review, with what the asset can recover.L3
• Sauvage deducted a grant of EUR 300,000 from the carrying amount of a production line; the grant has now become repayable because it has cut back its activity at the site. The line's carrying amount is raised by EUR 300,000, and the line's expected cash flows have fallen with the reduced activity (case fact). The finance director considers that no impairment review is needed, the increase being "purely accounting". In four to six sentences, justify the position you would adopt.L4