Impairment losses: linkage to IAS 36

Learning objectives

• Identify the Standard that deals with the impairment of intangible assets.L2
• Recognise an impairment loss determined in accordance with IAS 36.L2, L3

Normative references

• IAS 38 §111To determine whether an intangible asset is impaired, the entity applies IAS 36.

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

16 questions

• An entity suspects that an operating licence has lost value. Which standard does it apply to determine whether the licence is impaired?L2
• True or false? For an intangible asset measured under the cost model, an impairment loss determined by applying IAS 36 reduces its carrying amount.L2
• Quimper Data measures under the cost model a database acquired for 80,000, with amortisation of 32,000 at the reporting date. At that date, applying IAS 36, it recognises an impairment loss of 12,000, whose amount is provided by the expert. What is the carrying amount of the database after this loss?L2
• An acquired cosmetics brand, never amortised because its useful life was judged indefinite, has a carrying amount of {brand_carrying_amount} at 31 December 20X3. At that date, new regulations on certain ingredients lead management to set its remaining useful life at {remaining_life} years, with no residual value. The test performed under IAS 36 gives a recoverable amount of {recoverable_amount}. Calculate the impairment loss to be recognised at 31 December 20X3 and the annual charge from 20X4.L3
• The regional radio station Onde Claire holds a broadcasting authorisation that has so far been renewed without difficulty and is therefore not amortised. At the end of 20X5, the regulator announces that frequencies will be reallocated by tender in {years_to_expiry} years: the authorisation will end at that date, with no residual value. Its carrying amount is {licence_carrying_amount}; the appointed valuer has determined under IAS 36 a recoverable amount of {licence_recoverable}. What impairment loss should be recognised at the end of 20X5, and what annual charge should be used thereafter?L3
• An engineering company wants to know whether its structural calculation software, amortised under the cost model, is impaired. Which approach does it follow?L2
• The finance director of a toy manufacturer argues that a patent amortised over its finite useful life never needs to be considered for impairment, since amortisation is enough to reflect its loss in value. What should he be told?L2
• A licence to manufacture a generic medicine, acquired for {licence_cost} and measured under the cost model, has accumulated amortisation of {accumulated_amortisation} at the year-end. As a competitor has launched a cheaper product, the entity performs a test under IAS 36, which results in a recoverable amount of {recoverable_amount}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. Calculate the carrying amount before the test and the impairment loss.L2
• An online bank measures its internally developed payment platform at cost; the platform cost {software_cost} and has been amortised by {amortisation_to_date} to date. Following a major outage of the platform, the bank performs a test under IAS 36: the recoverable amount determined is {value_in_test}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. What is the carrying amount before the test and what impairment loss must be recognised?L2
• A sports club holds rights to exploit the image of its stadium, acquired for {rights_cost} and measured under the cost model. At the year-end, accumulated amortisation stands at {accumulated_amortisation} and an impairment loss of {prior_impairment} was already recognised two years ago. The team's relegation leads to a new test under IAS 36, which gives a recoverable amount of {recoverable_amount}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. Calculate the new impairment loss and the carrying amount after the test.L3
• A solar panel manufacturer acquired a patent on an anti-reflective coating for {patent_cost}, amortised on a straight-line basis over {patent_life} years with no residual value. After {years_amortised} years of amortisation, the emergence of a more efficient competing technology leads to a test under IAS 36, which shows a recoverable amount of {recoverable_amount}. No impairment loss has been recognised so far. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. Calculate the carrying amount before the test and the impairment loss.L3
• An advertising agency holds an acquired customer list, measured under the cost model, with a carrying amount of {carrying_amount}. The departure of several major advertisers leads to a test under IAS 36, which gives a recoverable amount of {recoverable_amount}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. The entity uses an accumulated impairment account. Record the year-end entry.L2
• A school publisher acquired a licence to adapt a reading method for {licence_cost}, measured under the cost model; accumulated amortisation amounts to {accumulated_amortisation}. A reform of the school curriculum reduces the appeal of the method: the test performed under IAS 36 results in a recoverable amount of {recoverable_amount}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. Which entry should be recorded at the year-end?L3
• A ferry company amortises on a straight-line basis over {system_life} years, with no residual value, a ticketing system acquired for {system_cost} and measured under the cost model. At the start of the year, accumulated amortisation amounts to {opening_amortisation}. At the year-end, following the loss of a sea route, a test under IAS 36 gives a recoverable amount of {recoverable_amount}. Under IAS 36, when the recoverable amount is lower than the carrying amount, the difference is recognised as an impairment loss in profit or loss. Record the charge for the year, then the impairment entry.L3
• Hélicéa holds a patent on a wind turbine blade, with a carrying amount of 300,000 and a cost of 320,000. After a failed tender, the test performed under IAS 36 gives a recoverable amount of 260,000. Out of prudence, the chief executive wants to write the patent down to 200,000. Under IAS 36, the impairment loss is the excess of the carrying amount over the recoverable amount. What impairment loss should be recognised?L3
• Nautéo's year-end file contains, for navigation software with a carrying amount of 500,000: a report prepared under IAS 36 setting the recoverable amount at 430,000, and an estimate by the insurer, prepared to set the insurance premium, of 380,000. Under IAS 36, the impairment loss is the excess of the carrying amount over the recoverable amount. What impairment loss should be recognised?L2