Indicators of reversal

Learning objectives

• Identify the external and internal indications that an impairment loss (other than for goodwill) may have decreased or may no longer exist.L2
• Analyse whether an indication of reversal requires the recoverable amount to be estimated or the useful life, depreciation (amortisation) method and residual value to be reviewed.L2, L3

Normative references

• IAS 36 §109States that paragraphs 110 to 116 deal with the reversal of an impairment loss for an asset or a CGU (the term "asset" covering both), supplemented by requirements specific to an individual asset (paragraphs 117 to 121), a CGU (paragraphs 122 and 123) and goodwill (paragraphs 124 and 125).
• IAS 36 §110At the end of each reporting period, the entity assesses whether there is any indication that an impairment loss recognised in prior periods (other than for goodwill) may no longer exist or may have decreased and, if so, estimates the recoverable amount.
• IAS 36 §111Lists the minimum indications of reversal. External sources: observable indications of a significant increase in the asset's value; favourable changes in the technological, market, economic or legal environment; decreases in market interest rates or rates of return affecting the discount rate. Internal sources: favourable changes in the use of the asset (including expenditure to enhance it or restructuring); internal reporting showing better economic performance than expected.
• IAS 36 §112The indications of reversal in paragraph 111 mainly mirror the indications of impairment in paragraph 12.
• IAS 36 §113An indication that an impairment loss (other than for goodwill) may have decreased or no longer exist may indicate that the remaining useful life, the depreciation (amortisation) method or the residual value needs to be reviewed and adjusted in accordance with the Standard applicable to the asset, even if no reversal is recognised.

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

8 questions

• At each reporting date, an entity that has recognised an impairment loss on an item of property, plant and equipment must assess whether there is any indication that this loss has decreased or no longer exists.L2
• The assessment, at each reporting date, of indications that an impairment loss has decreased or no longer exists applies in the same way to losses recognised on goodwill.L2
• Which of the following are among the external indications of a reversal of an impairment loss listed in IAS 36?L2
• Delvaux Textiles impaired a weaving loom in 20X1. Which of the following facts arising in 20X2 are internal reversal indications that require it to estimate the loom's recoverable amount again?L3
• What link does IAS 36 draw between indications of a reversal of an impairment loss and indications of impairment?L2
• Hautbois Médical has impaired both a stand-alone machine and a CGU. The general IAS 36 requirements on reversal (search for indications and conditions for a reversal) apply:L2
• Navarre Cargo impaired a vessel at the end of 20X1, its value in use having been calculated with a discount rate of 9%. In 20X2, market interest rates fall markedly, which affects the discount rate applicable to the vessel. What must the entity do at the 20X2 reporting date?L3
• Ibarra Composants impaired a press in 20X1. In 20X2, its internal reporting shows that the press performs better than expected. However, the estimated recoverable amount remains below the carrying amount, so no reversal is recognised. What consequence must the entity consider?L3