Reversal for an individual asset

Learning objectives

• Calculate the reversal, capped at the carrying amount that would have been determined, net of depreciation (amortisation), had no impairment loss been recognised previously.L2, L3
• Recognise the reversal in profit or loss, or in other comprehensive income for a revalued asset beyond the loss previously recognised in profit or loss, then adjust future depreciation (amortisation).L2, L3, L4

Normative references

• IAS 36 §117The carrying amount of an asset other than goodwill after a reversal cannot exceed the carrying amount that would have been determined, net of depreciation (amortisation), had no impairment loss been recognised in prior years.
• IAS 36 §118Any increase above that cap is a revaluation, accounted for under the Standard applicable to the asset.
• IAS 36 §119A reversal is recognised immediately in profit or loss, except for a revalued asset, for which it is treated as a revaluation increase.
• IAS 36 §120For a revalued asset, the reversal is recognised in other comprehensive income and increases the revaluation surplus, except to the extent of an impairment loss previously recognised in profit or loss, which is reversed in profit or loss.
• IAS 36 §121After a reversal, future depreciation (amortisation) is adjusted to allocate the revised carrying amount, less the residual value, over the remaining useful life.

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

16 questions

• The conditions for a reversal are met for an asset other than goodwill of Moreau Céréales. To what amount is its carrying amount increased?L3
• Kerbrat Mécanique measures its machines under the cost model. The conditions for reversing an impairment loss are met for one of them. Where is the reversal recognised?L2
• What limit does IAS 36 impose on the carrying amount of an asset other than goodwill after the reversal of an impairment loss?L2
• The recoverable amount of an impaired asset of Solenne Vitrages rises above the carrying amount it would have had without the impairment, net of depreciation. How does IAS 36 characterise the part of the increase above this cap?L3
• Pontis Emballages impaired a packaging line two years ago. At the reporting date, as the estimates have changed, the line's recoverable amount is estimated at {recoverable_amount}. Its carrying amount is {current_ca}; without the impairment loss, it would have been {ca_without_impairment}, net of depreciation. Calculate the amount of the reversal.L2
• Trans-Iroise acquires a refrigerated truck on 1 January 20X1 for {cost}, depreciated on a straight-line basis over {useful_life} years with no residual value. At the end of 20X2, after the depreciation for the year, it recognises an impairment loss of {impairment_loss}; the remaining useful life is unchanged. At the end of 20X4, after the depreciation for the year and following a change in estimates, the truck's recoverable amount is {recoverable_amount}. Calculate the reversal at the end of 20X4 and the truck's carrying amount after the reversal.L3
• The laboratory Lumen Diagnostics had impaired an amortised patent on a screening test after a competing process arrived. As this competitor has been withdrawn from the market, royalty forecasts are revised upwards and the patent's recoverable amount reaches {recoverable_amount}. The patent is carried at {current_ca}; without the impairment, its carrying amount would be {ca_without_impairment}, net of amortisation. What amount of reversal should be recognised?L3
• At the reporting date, Nordhaven Gaz recognises a reversal of an impairment loss of {reversal} on a compressor whose carrying amount was {ca_before_reversal}; this reversal amount already complies with the IAS 36 cap. The compressor's estimated residual value is {residual_value} and its remaining useful life is {remaining_life} years. Calculate the carrying amount after the reversal and the annual straight-line depreciation for the following years.L3
• Forages Delmas had impaired a drilling rig during a mining downturn. The recovery in activity leads to an upward revision of expected cash flows: the rig's recoverable amount is now {recoverable_amount}. Its carrying amount is {current_ca} and would have been {ca_without_impairment} without the impairment, net of depreciation. The residual value is estimated at {residual_value} and the remaining useful life at {remaining_life} years. Calculate the reversal and the annual straight-line depreciation for the following years.L4
• Bellerive Plasturgie measures its equipment at cost. An injection-moulding machine impaired three years ago has a carrying amount of {current_ca}. As the estimates have changed, its recoverable amount is {recoverable_amount}; without the loss, its carrying amount would be {ca_without_impairment}, net of depreciation. Record the reversal entry.L2
• The radiology practice Clinéa impaired an ultrasound scanner when new reimbursement tariffs reduced its expected cash flows. As these tariffs have been raised, the scanner's recoverable amount rises to {recoverable_amount}. Its amount in the statement of financial position is {current_ca}; without the prior impairment, it would be {ca_without_impairment} after depreciation. The scanner is measured under the cost model. Record the reversal.L3
• Belcastel Hôtels measures its buildings under the revaluation model. On a previous impairment of a building, a loss of {previous_loss_oci} was charged against that building's revaluation surplus and a loss of {previous_loss_pl} was recognised in profit or loss. At the reporting date, as the estimates have changed, a reversal of {reversal_amount} must be recognised (given amount, determined under IAS 36 and the standard applicable to the building; depreciation effects are ignored). Record the reversal entry.L4
• The cooperative Terres de Sénart accounts for farmland under the revaluation model. After a flood, the land had first been revalued to its fair value under IAS 16; the IAS 36 test had then shown an impairment loss, as its costs of disposal were not negligible and its value in use was below the revalued amount: {previous_loss_oci} charged against its revaluation surplus and {previous_loss_pl} in profit or loss. The drainage works carried out since then change the estimates of value in use, and the reversal to be recognised this year is {reversal_amount} (given amount). Record the reversal.L4
• Vigneaux Patrimoine measures an office building under the revaluation model. A prior impairment loss of 40,000 had been charged entirely against that building's revaluation surplus; nothing went to profit or loss. As the estimates have changed, a reversal of 28,000 must be recognised (given amount). Which treatment applies?L4
• Arbois Céramique measures its kilns at cost. A kiln impaired two years ago has a carrying amount of 140,000; without the loss, its carrying amount would be 200,000, net of depreciation. As the estimates have changed, its recoverable amount is now 230,000. Which treatment applies?L3
• The recoverable amount of a cash-generating unit that carries goodwill, and whose impairment loss had been allocated to goodwill and then to the other assets, increases on a lasting basis. The unit's assets are not revalued. How is the reversal treated?L3