Scope and exclusions

Learning objectives

• Identify whether an asset is subject to the impairment test of IAS 36 or to another Standard (inventories, deferred tax assets, financial assets within IFRS 9, investment property measured at fair value, biological assets, assets held for sale).L1, L2
• Determine how IAS 36 applies to investments in subsidiaries, associates and joint ventures and to assets measured under the revaluation model.L2

Normative references

• IAS 36 §2Excludes from the scope the assets whose impairment or measurement is dealt with by another Standard: inventories, contract assets and costs to obtain or fulfil contracts with customers, deferred tax assets, assets arising from employee benefits, financial assets within the scope of IFRS 9, investment property measured at fair value, biological assets measured at fair value less costs to sell, assets arising from insurance contracts within IFRS 17 and non-current assets held for sale.
• IAS 36 §3Explains that the excluded assets are excluded because the Standards that govern them already contain their own recognition and measurement requirements.
• IAS 36 §4Specifies that the Standard applies to financial assets classified as investments in subsidiaries (IFRS 10), associates (IAS 28) and joint ventures (IFRS 11), the impairment of other financial assets being dealt with by IFRS 9.
• IAS 36 §5Excludes from the scope financial assets within IFRS 9, investment property measured at fair value and biological assets measured at fair value less costs to sell, but keeps within the scope assets revalued under other Standards: since the only difference between fair value and fair value less costs of disposal is the direct incremental costs of disposal, a revalued asset whose disposal costs are negligible is unlikely to be impaired; if they are not negligible, the asset is impaired if its value in use is less than its revalued amount. In both cases, the revaluation requirements of the applicable Standard are applied first, then IAS 36 to assess whether the asset may be impaired.

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

13 questions

• True or false? The inventories of a manufacturing entity are subject to the IAS 36 impairment test.L1
• True or false? An investment in an associate falls under IAS 36 for impairment, even though it is a financial asset.L1
• True or false? An investment property measured at fair value must, when there is an indication, be tested for impairment under IAS 36.L2
• True or false? A building accounted for under the revaluation model of another standard remains within the scope of IAS 36.L2
• Brenvel Ltd reports the following assets. Which one falls within the scope of the IAS 36 impairment test?L1
• Why are assets such as inventories or deferred tax assets excluded from the scope of IAS 36?L1
• Orlenne Ltd accounts for land under the revaluation model; the direct costs that a disposal would trigger are negligible. Which conclusion does IAS 36 allow it to draw?L2
• Which of the following assets are excluded from the scope of IAS 36? (Several answers possible.)L1
• The Castelmar group reviews the assets in its statement of financial position. Which of them fall under IAS 36 for impairment? (Several answers possible.)L2
• At 31 December 20X1, Ardenvale Ltd holds: an investment in its subsidiary Corvel, a portfolio of bonds within the scope of IFRS 9 and a batch of goods held in inventory. Indications suggest that all three assets have lost value. Which of these assets must Ardenvale examine under IAS 36?L2
• Mirabeau Ltd accounts for an owner-occupied building under the revaluation model, at a revalued amount of EUR 900,000. The direct costs of disposing of it would be significant (EUR 40,000). Management estimates the building's value in use at EUR 860,000. Which analysis is consistent with IAS 36?L2
• Fenmoor Ltd has classified a former production site as a non-current asset held for sale. What does IAS 36 provide for this asset?L1
• True or false? Contract assets and costs to obtain or fulfil contracts with customers are not tested under IAS 36.L2