Disclosures for each impairment loss or reversal

Learning objectives

• Prepare the disclosures about an impairment loss or a reversal for the period: events, amount, nature of the asset or description of the unit, recoverable amount and its basis (fair value or value in use, level of the hierarchy, techniques, discount rate).L2, L3, L4

Normative references

• IAS 36 §130For each asset (including goodwill) or CGU for which an impairment loss has been recognised or reversed during the period, the entity discloses: the events and circumstances; the amount; for an asset, its nature (and the segment reported under IFRS 8); for a CGU, its description, the amount by class of assets (and by segment) and, if the aggregation of assets has changed, the former and current aggregation and the reasons for the change; the recoverable amount and its basis (fair value less costs of disposal or value in use). If fair value less costs of disposal: the level of the fair value hierarchy (IFRS 13); for Levels 2 and 3, the valuation technique (and any change, with the reasons) and each key assumption; and the discount rates used in the current and the previous measurement if a present value technique is used. If value in use: the discount rates used in the current and the previous estimate.

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

8 questions

• Corvail, which reports segment information, recognised a material impairment loss of 400,000 in 20X2 on a production line in its Industry segment. The line's recoverable amount is its value in use. Which of the following must it disclose about this loss?L2
• The Hollis group recognised a material impairment loss on its West Network cash-generating unit. The unit's recoverable amount is its value in use, calculated with a discount rate of 9%, compared with 8% in the previous estimate. Regarding the recoverable amount, which of the following must be disclosed?L3
• Dravos has materially impaired a cold-storage warehouse. Its recoverable amount is fair value less costs of disposal, categorised within Level 3 of the IFRS 13 hierarchy and determined by discounting cash flows (valuer's data). Which of the following must Dravos disclose?L3
• Ravelle recognised a material impairment loss of 250,000 on its South Distribution cash-generating unit. This year the unit was redefined: two depots previously tested separately are now grouped in it. What must the note contain as the description of the unit?L3
• Tavira's draft note states: following a lasting fall in occupancy, an impairment loss of 180,000 was recognised on the Lake hotel, whose recoverable amount is 1,200,000. This recoverable amount is value in use, calculated with a discount rate of 8% (7% in the previous estimate). What is missing?L2
• The Mireval group, which reports segment information, reversed in 20X3 a material impairment loss of 70,000 on a patent in its Health segment, following a regulatory approval. The patent's recoverable amount is its fair value less costs of disposal, categorised within Level 2 of the IFRS 13 hierarchy and determined using a market approach, without discounting (valuer's data). The draft note mentions only the amount of the reversal and the approval obtained. How should it be completed?L4
• Orbelle, which reports segment information, recognised in 20X3 a material impairment loss of 600,000 on its East Paper Mill cash-generating unit (Packaging segment), following the loss of its main customer. The unit's recoverable amount of 2,400,000 is its fair value less costs of disposal, categorised within Level 3 of the IFRS 13 hierarchy and determined by discounting cash flows at a rate of 10%; the key assumptions relate to volumes and energy prices. The loss is allocated between machinery (450,000) and buildings (150,000). Draft the outline of the note on this loss.L4
• In 20X3, Quessant reversed a material impairment loss of 120,000 on a vessel in its Freight segment, after a lasting recovery in freight rates. The vessel's recoverable amount is its value in use, calculated with a discount rate of 7% (8% in the previous estimate). The finance director argues that a reversal is good news that calls for no detailed disclosure and, failing that, that giving the current rate is enough. Write a judgement memo for the audit committee.L4