Professional Documents
Culture Documents
Impairment of Assets
KPMG International Financial Reporting Group
IAS 36 - 1
Agenda
Background and scope
Cash-generating units and goodwill allocation
Indications of impairment and frequency of testing
Recoverable amount
Fair value less costs to sell
Value in use
Accounting aspects
Disclosure
IAS 36 - 2
Background
Objective
Assets should be carried at no more than their
recoverable amount, i.e. the amount expected to be
recovered through use of the asset, or its fair value
less cost to sell.
Purpose
Specify procedures to be followed to ensure that
assets are not carried at more than recoverable
amount
Specify when an impairment loss should be reversed
Specify required disclosures
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee,
and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
Scope
Applies to all assets except
Inventories
Assets arising from construction contracts
Deferred tax assets
Financial assets
Assets arising from employee benefits
Investment property measured at fair value
Biological assets measured at fair value less estimated
point-of-sale costs
Assets arising from insurance contracts
Non-current assets classified as held for sale
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee,
and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
Agenda
Background and scope
Cash-generating units and goodwill allocation
Indications of impairment and frequency of testing
Recoverable amount
Fair value less costs to sell
Value in use
Accounting aspects
Disclosure
IAS 36 - 5
CGU Definition
Cash-generating unit (CGU) is smallest identifiable
group of assets that generates cash inflows that
are largely independent from other (groups of)
assets.
IAS 36 - 8
Agenda
Background and scope
Cash-generating units and goodwill allocation
Indications of impairment and frequency of testing
Recoverable amount
Fair value less costs to sell
Value in use
Accounting aspects
Disclosure
IAS 36 - 9
Indications of impairment
External sources
Significant decline in market value
Technological, market, economic, legal environment
Increases in interest rates or rates of return
Internal sources
Evidence of obsolescence or physical damage
Discontinuance, disposal, restructuring plans
Asset performance declining or expected to decline
Impairment test
Annually,
and
Frequency - summary
yes
Asset / CGU
other than below
Indication?
no
impairment
test
yes
Indication?
no
impairment
test
impairment
test
impairment
test at least
annually
recent calculation
can be used if
criteria are met
- any time within
an annual
reporting period
- consistency
- initial recognition
Agenda
IAS 36 - 14
Recoverable amount
Recoverable amount is the greater of:
Value in use (VIU): present value of estimated future
cash flows to be derived from an asset/CGU (continuing
use and ultimate disposal)
Fair value less costs to sell (FVLCS): amount
obtainable from the sale of asset/CGU in an arms length
transaction less costs of disposal
If FVLCS is determinable, then not required to measure
VIU or test at CGU level when:
an assets FVLCS is higher than the carrying amount; or
an assets FVLCS can be estimated to be close to VIU
(e.g. asset held for disposal)
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee,
and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 36 - 15
Agenda
IAS 36 - 16
IAS 36 - 17
IAS 36 - 18
Agenda
IAS 36 - 19
Value in use
Elements to be considered:
Cash inflows and outflows specific to the asset/CGU
Time value of money (market risk-free rate)
Uncertainty inherent to the asset
Expectations about possible variations in the amount
or timing of those future cash flows
Other factors (e.g. illiquidity)
IAS 36 - 20
IAS 36 - 21
IAS 36 - 22
If pre-tax CF is used
Pre-tax DR is applied
If post-tax CF is used
Post-tax DR is applied
Nominal DR is applied
Real DR is applied
Agenda
IAS 36 - 26
NO
Recognise impairment
loss on assets / CGUs
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee,
and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
First allocate to GW
IAS 36 - 27
With GW
No loss reversal on
GW
IAS 36 - 29
IAS 36 - 30
Agenda
IAS 36 - 31
Key disclosures
By category of asset
Amount of impairment losses recognised / reversed during the
period in
Income statement and
Directly to equity
If recognised in income statement disclosure of where items are
included
Disclosures when impairment losses are material for an individual
asset
Information on basis used for determining recoverable amount
Discount rate used
IAS 36 - 32
Central points
IAS 36 covers impairment of PPE, goodwill,
intangible assets and investments in subsidiaries,
joint ventures and associates
Detailed impairment testing generally is required only
when there is an indication of impairment
Annual impairment testing:
Intangible assets not yet available for use
Intangible assets with indefinite useful life
Goodwill
Recognise impairment loss if
Asset (CGU) carrying amount > FVLCS or Value in
use
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee,
and a member firm of KPMG International, a Swiss cooperative. All rights reserved.
IAS 36 - 33
Contact details
KPMG IFRG Limited
+44 (0)20 7694 8871
www.kpmgifrg.com
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although
we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or
that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough
examination of the particular situation.
2007 KPMG IFRG Limited, a UK registered company, limited by guarantee, and a member firm of KPMG International, a Swiss cooperative.
All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.
KPMG International Financial Reporting Group is part of KPMG IFRG Limited.
KPMG International is a Swiss cooperative. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG
International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis--vis
third parties, nor does KPMG International have any such authority to obligate or bind any member firm.