Asset whose recoverable amount cannot be determined

Learning objectives

• Determine the treatment of an asset whose recoverable amount cannot be determined: a loss if its carrying amount exceeds the higher of its fair value less costs of disposal and the result of the allocation; none if the unit is not impaired.L3, L4

Normative references

• IAS 36If the recoverable amount of an asset cannot be determined, an impairment loss is recognised for that asset if its carrying amount is greater than the higher of its fair value less costs of disposal and the result of the allocation; no loss is recognised if the CGU is not impaired.

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

6 questions

• An extruder of Ternay Plastiques has been damaged but is still working. Its value in use cannot be estimated individually, because it does not generate independent cash inflows, and its fair value less costs of disposal is below its carrying amount. The CGU to which it belongs is not impaired. What treatment applies to the extruder?L3
• Orvalis operates a bottling line that is a CGU: carrying amount 900,000, recoverable amount 1,050,000. A labelling machine on the line, with a carrying amount of 90,000, has been damaged; its fair value less costs of disposal is 55,000 and its value in use cannot be estimated separately. What impairment loss should be recognised on the labelling machine?L4
• The Foundry Workshop CGU of Malbrun, with no goodwill, comprises a furnace with a carrying amount of 100,000 and other assets of 300,000. Its recoverable amount is 320,000. The furnace is damaged: its value in use cannot be estimated individually and its fair value less costs of disposal is 70,000. No other asset has a binding floor. What impairment loss should be recognised on the furnace?L4
• Under IAS 36, when the recoverable amount of an individual asset cannot be determined and its CGU is impaired, in which case is an impairment loss recognised on that asset?L3
• The Cutting Line CGU of Pellerin Bois, with no goodwill, comprises an industrial saw with a carrying amount of 80,000 and other assets of 120,000. Its recoverable amount is 100,000. The value in use of the saw cannot be estimated individually; its fair value less costs of disposal is 55,000. The other assets have no binding floor. What is the carrying amount of the saw after impairment?L4
• Why does IAS 36 describe as arbitrary the allocation of a CGU's loss among its assets other than goodwill, when the recoverable amount of each of them cannot be estimated?L3