Assessment at each reporting date

Learning objectives

• Explain that an asset is impaired when its carrying amount exceeds its recoverable amount and that the entity assesses at the end of each reporting period whether there is any indication of impairment.L1
• Determine, where there is an indication, the requirement to estimate the recoverable amount and the possible need to review the useful life, the depreciation (amortisation) method or the residual value.L2

Normative references

• IAS 36 §7States that paragraphs 8 to 17 determine when recoverable amount must be estimated; they use the term "an asset" but apply equally to an individual asset and to a CGU, with additional requirements set out for CGUs and goodwill.
• IAS 36 §8An asset is impaired when its carrying amount exceeds its recoverable amount. Paras. 12 to 14 describe indications of impairment; if any of them is present, the entity must make a formal estimate of recoverable amount. Apart from the cases in para. 10 (annual tests), the standard requires no formal estimate of recoverable amount when there is no indication of impairment.
• IAS 36 §9Requires the entity to assess at the end of each reporting period whether there is any indication that an asset may be impaired and, if so, to estimate the recoverable amount of the asset.
• IAS 36 §17Notes that an indication of impairment may lead to a review of the useful life, the depreciation (amortisation) method or the residual value, even if no impairment loss is recognised.

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

12 questions

• True or false? An asset is impaired when its carrying amount exceeds its recoverable amount.L1
• True or false? At each reporting date, the entity must estimate the recoverable amount of all its property, plant and equipment, whether or not there is an indication of impairment.L1
• What must an entity do at each reporting date for its assets within the scope of IAS 36 (other than assets subject to an annual test)?L1
• True or false? An indication of impairment may lead the entity to review the useful life, depreciation method or residual value of an asset, even if no impairment loss is ultimately recognised.L2
• At 31 December 20X1, Pellmont Ltd identifies an indication of impairment on one of its warehouses. What is the immediate consequence under IAS 36?L2
• At 31 December 20X2, Corbière Ltd identifies an indication of impairment on a packaging line (carrying amount: EUR 420,000). It estimates its recoverable amount at EUR 455,000. The analysis also shows that the line will be replaced earlier than planned. What should Corbière do?L2
• At 31 December 20X1, Ravelin Ltd reviews an assembly line carried at cost and depreciated over 10 years. Its documented analysis reveals no indication of impairment. The finance director nevertheless wants the value in use of the line to be calculated. Which statement is correct?L2
• Which of the following statements about assessing impairment are correct? (Several answers possible.)L2
• Tamaris Ltd holds a truck with a carrying amount of EUR 60,000 and a recoverable amount of EUR 54,000. What can be concluded?L1
• True or false? The requirements that determine when recoverable amount must be estimated apply both to an individual asset and to a cash-generating unit.L2
• For the 31 December 20X2 reporting date, the management accountant of Belvarde Ltd proposes to stop examining indications of impairment for its property, plant and equipment: in his view, these assets are depreciated and no loss has ever been recognised. How should this proposal be answered?L2
• Ombrelle Ltd is preparing its annual reporting. Which of the following steps reflect what IAS 36 requires for a depreciated item of property, plant and equipment? (Several answers possible.)L1