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WorkpaperIAS 16 — Property, Plant and EquipmentL2 · L3 · L4

Impairment linkage (IAS 36)

2 missions11 sections to document40 min
Prepared by
AI-assisted draft
Reviewed by
Not reviewed — human review required
Status
Published

Objective of the workpaper

This workpaper documents only the link with IAS 36: indications of impairment, need for a test, receipt of the recoverable amount determined in the IAS 36 file, recognition of the loss and new depreciation basis. The test itself is not performed here. Compensation from a third party is documented separately from the loss.

11 sections · 23 blocks · 3 calculations · 2 entries

  • IAS 16 §63
  • IAS 16 §65
  • IAS 16 §66
  • IAS 16 §78

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

2 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Flood, compensation and disposal of a production line
Case tasks documented here
  • Should the idle line still be depreciated in 20X2 and 20X3? What assumption do you make about IFRS 5?
  • Calculate the carrying amount before the test and the impairment loss at 31 December 20X2.
  • When and at what amount is the insurance compensation recognised? Can it reduce the cost of the replacement line?
  • What journal entries do you record at 31 December 20X2 in respect of the flood?
  • Calculate the revised annual charge after the impairment and the 20X3 charge up to derecognition.
1

Inputs

Inputs

  • Asset and event considered

    TextRequired

  • Date of the assessment

    DateRequired

  • Carrying amount before the test

    NumberRequired

    840,000

  • Residual value retained after the test

    Number

    0

  • Remaining useful life

    Number

    7 years

2

Supporting evidence

Evidence

  • Evidence obtained and referenced (category, document reference)

    EvidenceRequired

3

Result of the IAS 36 test (received)

Analysis

IAS 16 §63

  • Reference of the IAS 36 test file (outside this workpaper)

    Text

  • Recoverable amount determined under IAS 36

    NumberRequired

    280,000

4

Compensation from third parties

Analysis

IAS 16 §65IAS 16 §66

  • Has the compensation become receivable?

    Choice

    Yes, recognised in profit or loss

    Yes, recognised in profit or loss / Not yet

  • Compensation receivable

    Number

    400,000

  • Analysis: compensation separate from the impairment loss

    Text

5

Loss and revised depreciation basis

Calculations

IAS 16 §63

  • Impairment loss

    CalculationRequired

    560,000

    Carrying amount before the test ; − Recoverable amount determined under IAS 36

  • Carrying amount after impairment

    CalculationRequired

    280,000

    Carrying amount before the test ; − Impairment loss

  • Revised annual charge

    Calculation

    40,000

    Carrying amount after impairment ; Residual value retained after the test ; Remaining useful life

6

Journal entries

Entries

  • Recognition of the impairment loss

    Entry

    AccountDebitCredit
    Impairment loss560,000
    Accumulated impairment560,000

  • Compensation receivable

    Entry

    AccountDebitCredit
    Compensation receivable400,000
    Compensation income400,000
7

Indications of impairment

Judgment

IAS 16 §63

  • Indications noted (indicative list; the full analysis falls under IAS 36)

    ChecklistRequired

    • Physical damage or obsolescence
    • Asset idle, discontinuance or restructuring planned
    • Significant decline in market value
    • Adverse change in the environment
    • Performance worse than expected

  • Is an impairment test under IAS 36 required?

    JudgmentRequired

    Yes: indication present, test to perform under IAS 36 / No: no indication

  • Rationale: facts relied on, analysis, alternative rejected

    TextRequired

8

Conclusion

Conclusion

  • Conclusion: need for a test, loss recognised, new depreciation basis

    ConclusionRequired

9

Impact on the financial statements

FS impact

  • Impact by heading, derived from the entries above (the Notes row points to the disclosures)

    TableRequired

10

Disclosures

Disclosure

IAS 16 §78

  • Impairment of property, plant and equipment

    ChecklistRequired

    • Information on impaired assets disclosed under IAS 36
11

Normative references

References

  • Paragraphs cited in this workpaper (verification status shown from the registry)

    References

12

Checks and financial statement impact

  • The impairment entry balancesPass
  • The compensation entry balancesPass
Assets
-160,000
Liabilities
0
Profit or loss
-160,000
OCI
0
Equity
-160,000