Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. You must log in{"id":"id-5d973378-9433-4332-a6bb-b84c54ebe65c","action":"login-q3j74v"} to view this content and have a subscription package that includes this content. • the interaction between IAS 36 and other IFRSs. indefinite useful lives (IAS 36.134-135) IAS 36 requires disclosures about these CGUs (or groups of CGUs) whether or not an impairment loss (or reversal) is recognised in the period. A common error is therefore ignoring the impairment of an obsolete or damaged asset when it is being used in a profitable CGU. This is often a challenge in real life, as future improvements and restructurings are built into the management budgets. BCZ98-BCZ104), Recognition based on an ‘economic’ criterion (paras. BCZ23-BCZ27), Other refinements to the measurement of recoverable amount (paras. After down-sizing, half of the building is now used internally and half rented to … Volume B - Financial Instruments - IFRS 9 and related Standards, Volume C - Financial Instruments - IAS 39 and related Standards, Model financial statements for IFRS reporters, IFRS Standards (linked to Deloitte accounting guidance), International Financial Reporting Standards (linked to Deloitte accounting guidance), International Financial Reporting Standards (Blue and Red Books), IFRS Educational Material (including Webcasts and Podcasts), Selected IASB Speeches, Statements and Press Releases, Purpose-driven Business Reporting in Focus, Copyright notice and disclaimer of liability, IAS 36 Impairment of Assets Illustrative examples. These examples are based on illustrative examples from IAS 1. BC228A), Transition provisions for Recoverable Amount Disclosures for Non-Financial Assets (paras. Therefore, the asset should be assessed for impairment in its own right, rather than as part of a CGU. BC187-BC191), Disclosures for cash‑generating units containing goodwill or indefinite‑lived intangibles (paragraphs 134 and 135) (paras. ILLUSTRATIVE EXAMPLES FOR THE ACCOMPANYING DOCUMENTS LISTED BELOW, SEE PART B OF THIS EDITION. BCZ105-BCZ107), Revalued assets: recognition in the income statement versus directly in equity (paras. Year. Accordingly, this guide should not be used as a substitute for referring to the standards and other relevant interpretative guidance. Volume A - A guide to IFRS reporting Volume B - Financial Instruments - IFRS 9 and related Standards Volume C - Financial Instruments - IAS 39 and related Standards IFRS disclosures in practice Model financial statements for IFRS reporters Set a date to view the document . However, one of the amendments potentially resulted in the disclosure requirements being broader than originally intended. BC137-BC159), Recognition and measurement of impairment losses (paragraphs 88-99 and 104) (paras. The analysis in IE2 – IE4 states: CGU too small . BCZ178-BCZ181), Reversing impairment losses for assets other than goodwill (paragraphs 110-123) (paras. ISA 540 (Revised) Implementation – Illustrative Examples. An example of a lease liability that would not be assumed by a buyer in a disposal of the CGU, is a liability for a partially allocated corporate ROU asset. You can find the video in the bonus section. 36-52) Reimbursements (paras. The chapter on impairment of assets and non-current assets held for sale covers: Impairment of assets (IAS 36) Examples of … In cases where the lessee concludes that the buyer would not BCZ28-BCZ30), Net selling price (paragraphs 25-29) (paras. Section F: Disclosures This Section provides a summary of the IAS 36 disclosure requirements and highlights particular areas of focus for regulators, including select illustrative examples for these areas of focus. Day. 84-92) Transitional provisions (paras. Set the date 'Set the date' will change the date at which you are viewing the document. IAS 19 excel examples: simple calculation of defined benefit plan; IAS 21 excel examples: recognition of exchange differences; translation of a foreign operation; IAS 23 excel examples: exchange differences eligible for capitalisation; IAS 28 excel examples: illustration of application of equity method; accounting for a downstream transaction You are here ... International Accounting Standards . BC160-BC170), Changes as a result of 2008 revisions to IFRS 3 (Appendix C) (para. History of amendments; Document overview; Tools; Set document view date. ... Reasons for revising IAS 36 IN2 The International Accounting Standards Board developed this revised IAS 36 as part of its project on business combinations. 36.78 and the IFRS Interpretations Committee discussion [IAS 36.29, 78. In April 2001 the International Accounting Standards Board resolved that all Standards and Interpretations issued under previous Constitutions continued to be applicable unless A limited amendment was made in 2000. The amended standard and new standard are effective for periods beginning on or after 1 January 2017 and 1 January 2018, respectively. Appendix A. BC171-BC177), Allocating an impairment loss between the assets of a cash‑generating unit (paragraphs 104-107) (paras. Financial statements disclose corresponding information for the preceding period (comparatives), unless a It stresses that this list is the minimum to be considered and that it is not exhaustive. BC131-BC177), Allocating goodwill to cash‑generating units (paragraphs 80-87) (paras. Preparing cash flow projections that exclude such items would often necessitat… BCZ95-BCZ112), Recognition based on a ‘permanent’ criterion (paras. 18-57), Recognising and measuring an impairment loss (paras. BC227-BC228), Transitional provision for Improvements to IFRSs (2009) (para. One factor specifically noted by IAS 36 as an external indicator of impairment is that the carrying amount of the net assets of the Certain assets are not covered by the standard and these are generally those assets dealt with by other standards, for example, financial assets dealt with under IAS 39. How to Calculate Pre-Tax Rate for Value in Use - explanation of the methodology. Illustrative IFRS consolidated financial statements - Investment property 2020. A company must assess at each balance sheet date whether an asset is impaired. Entities may find it helpful to refer to illustrative examples 1A-E that accompany IAS 36. IFRS 13 Fair Value Measurement amended all references to “fair value less costs to sell” in these examples with effect from 1 January 2013. CS 8.1 Impairment of assets Source: IFRS - IAS 36 Illustrative Examples Impairment of Assets – Illustrative examples Example 1 Identification of cash-generating units A - Retail store chain Background Store X belongs to retail store chain M. X makes all its retail purchases through M’s purchasing centre. 3. Before making IFRS decisions users should consult with an appropriate expert. 7-17), Measuring recoverable amount (paras. The project’s objective was to IAS 36 also outlines the situations in which a company can reverse an impairment loss. Under IAS 36, ‘Impairment of assets’, these assets are required to be tested annually for impairment irrespective of indictors of impairment (IAS 36 para 10). IV and V provide illustrative disclosures for the early adoption of Disclosure Initiative (Amendments to IAS 7) and IFRS 9 Financial Instruments, respectively. BC210-BC228C), Transitional impairment test for goodwill (paras. BC229), History of the development of a standard on impairment of assets (paras. 59-60) Use of provisions (paras. OBJECTIVE IAS 36 prescribes the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amounts. Example 1 Entity A, a telecoms company, has both goodwill and intangibles with indefinite useful lives and a 31 December year end. IAS 34 requirements are illustrated in our Guide to condensed interim financial statements – Illustrative disclosures . BC129-BC130), Testing goodwill for impairment (paragraphs 80-99) (paras. 3 | IAS 36 Impairment of Assets IASB APPLICATION DATE (NON-JURISDICTION SPECIFIC) IAS 36 is applicable for annual reporting periods commencing on or after 1 January 2005. BC205-BC209), Changes as a result of Improvements to IFRSs (2008) (para. International Accounting Standards . All the paragraphs have equal authority. Menu. IAS 36 — Impairment of Assets ... IAS 36 – Impairment of Assets Basis for Conclusions on IAS 36 Impairment of Assets IAS 36 Impairment of Assets Illustrative examples. The examples illustrate accounting estimates with varying characteristics and degrees of complexity. Example 1 Identification of cash-generating units. BC56-BC80), Consideration of future tax cash flows (paras. BCZ21-BCZ22), Recoverable amount based on the higher of net selling price and value in use (paras. One factor specifically noted by IAS 36 as an external indicator of impairment is that the carrying amount of the net assets of the In principle, under IAS 36, cash flows relating to assets that generate cash flows independently of other assets are excluded from the forecasts (because they are also excluded from the carrying amount of a CGU). IFRS Manual of Accounting . Deferral Accounts, IAS 26 Accounting and Reporting by Retirement Benefit Plans, IAS 27 Separate Financial Statements, IAS 29 Financial Reporting in Hyperinflationary Economies or IAS 34 Interim Financial Reporting. 93-94A) Effective date (paras. BCZ113-BC118), Internal transfer pricing (paragraph 70) (paras. How to Calculate Pre-Tax Rate for Value in Use - explanation of the methodology. International Accounting Standards. You can find the video in the bonus section. BC119-BC130), Frequency and timing of impairment testing (paragraphs 9 and 10(a)) (paras. IAS 36 Impairment of Assets – Summary – Examples – PDF October 1, 2019 IFRS 16 Leases – Summary with examples – PDF October 1, 2019 IFRS 15 Revenue from contracts with customers April 29, 2020 IAS 36 — Impairment of Assets. IAS 36 — Impairment of Assets. 53-58) Changes in provisions (paras. The private railway could be sold only for scrap value and it does not generate cash inflows that are largely independent of the cash inflows from the other assets of the mine. Example 1 An acquired customer list Example 2 An acquired patent that expires in 15 years Example 3 An acquired copyright that has a remaining legal life of 50 years International Accounting Standards . IAS 19 excel examples: simple calculation of defined benefit plan; IAS 21 excel examples: recognition of exchange differences; translation of a foreign operation; IAS 23 excel examples: exchange differences eligible for capitalisation; IAS 28 excel examples: illustration of application of equity method; accounting for a downstream transaction IAS 36 states (IAS 36.44-49) that projected cash flows should exclude any estimated future cash inflows or outflows expected to arise from future restructurings (until the criteria for recognition of provisionare met) or from improving or enhancing the asset’s performance. IAS 34 requirements are illustrated in our Guide to condensed interim financial statements – Illustrative disclosures . BCZ31-BCZ39), Net realisable value (paras. IFRS Manual of Accounting . Copyright © 2020 Deloitte Development LLC. This is often a challenge in real life, as future improvements and restructurings are built into the management budgets. You are here ... International Accounting Standards . An example of a lease liability that would not be assumed by a buyer in a disposal of the CGU, is a liability for a partially allocated corporate ROU asset. Each example illustrates a selection of requirements from ... For example, IAS 2, paragraph 36. IU 05-16]. Therefore, the asset should be assessed for impairment in its own right, rather than as part of a CGU. Inline XBRL; ZIP; Example 12: Consolidated and Separate Statements of Financial Position. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Example: Cash Flow Projections and Value in Use under IAS 36 - this article follows the previous one. Illustrative Example—Long-term Interests in Associates and Joint Ventures This example portrays a hypothetical situation illustrating how an entity (investor) accounts for long-term interests that, in substance, form part of the entity’s net investment in an associate (long-term interests) applying IFRS 9 and IAS 28 based on the assumptions BC192-BC209), Background to the proposals in the Exposure Draft (paras. • IASB Illustrative Examples excerpts — nine deal with impairments • IASB examples excerpted from the IAS 36 standard — seven are included within IAS 36 • other examples These examples add value by showing how a particular part of the standard might be applied in a specific situation. IAS 36 — Impairment of Assets. Month. Example 36—Incremental costs of obtaining a contract ... IE2 Examples 1–4 illustrate the requirements in paragraphs 9–16 of IFRS 15 on identifying the contract. Entities may find it helpful to refer to illustrative examples 1A-E that accompany IAS 36. BC228B-BC228C), Summary of main changes from the Exposure Draft (para. The amended standard and new standard are effective for periods beginning on or after 1 January 2017 and 1 January 2018, respectively. 36.78 and the IFRS Interpretations Committee discussion [IAS 36.29, 78. IAS 34 requirements are illustrated in our Guide to condensed interim financial statements – Illustrative disclosures . ... Financial liabilities and equity (IFRS 9, IAS 32) Chapters by name (Accounting to Fair value) Accounting policies, accounting estimates and errors (IAS 8) Consolidated financial statements (IFRS 10) Contents. IAS 36: Illustrative Examples; Document overview . Terms defined in this Standard are in italics the first time they appear in the Standard. IAS 36 provides guidance in the form of a list of internal and external indicators of impairment. 109-125), Transition provisions and effective date (paras. BCZ12-BCZ13), Recoverable amount based on fair value (paras. Previous Section Next Section . In addition, IFRS and its interpretation change over time. IU 05-16]. BC116-BC118), Testing indefinite‑lived intangibles for impairment (paras. In addition, the … See also illustrative examples 5 and 6 to IAS 36. IAS 34 requirements are illustrated in our Guide to condensed interim financial statements – Illustrative disclosures . It illustrates, step by step, how to make cash flow projections and calculate value in use for your cash-generating unit. BC90-BC94), Recognition of an impairment loss (paragraphs 58-64) (paras. The International Accounting Standards Board, as a consequential amendment to IFRS 13 'Fair Value Measurement', modified some of the disclosure requirements in IAS 36 'Impairment of Assets' regarding measurement of the recoverable amount of impaired assets. 138-140N), Withdrawal of IAS 36 (issued 1998) (para. IAS 36 states (IAS 36.44-49) that projected cash flows should exclude any estimated future cash inflows or outflows expected to arise from future restructurings (until the criteria for recognition of provisionare met) or from improving or enhancing the asset’s performance. If you navigate away from this document, the view date will reset. International Accounting Standards . BC209E-BC209Q), Transitional provisions (paragraphs 138-140) (paras. IAS 36 seeks to ensure that an entity's assets are not carried at more than their recoverable amount (i.e. Accordingly, this guide should not be used as a substitute for referring to the standards and other relevant interpretative guidance. Illustrative Example—Long-term Interests in Associates and Joint Ventures This example portrays a hypothetical situation illustrating how an entity (investor) accounts for long-term interests that, in substance, form part of the entity’s net investment in an associate (long-term interests) applying IFRS 9 and IAS 28 based on the assumptions measure of value of ‘net’ economic benefits embedded in a fixed asset that can be unlocked in event of the sale of the asset Section F: Disclosures This Section provides a summary of the IAS 36 disclosure requirements and highlights particular areas of focus for regulators, including select illustrative examples for these areas of focus. the higher of fair value less costs of disposal and value in use). It owns a headquarters building that used to be fully occupied for internal use. 61-62) Application of the recognition and measurement rules (paras. Illustrative Examples – IAS 36 Impairment of Assets . Preparing cash flow projections that exclude such items would often necessitat… Practical tip: disposals When an asset is to be disposed of, its cash inflows will be independent of the cash inflows of other assets. Using present value techniques to measure value in use. BCZ96-BCZ97), Recognition based on a ‘probability’ criterion (paras. BCZ182-BCZ186), Reversing goodwill impairment losses (paragraph 124) (paras. measure of value of ‘net’ economic benefits embedded in a fixed asset that can be unlocked in event of the sale of the asset BC170A), Timing of impairment tests (paragraphs 96-99) (paras. IAS 34 Interim Financial Reporting was issued by the International Accounting Standards Committee in February 1998. The disclosures are primarily concerned with the assumptions and estimates used in determining VIU or FVLCD, whichever supports the recoverable amount. IAS 36 — Impairment of Assets ... IAS 36 – Impairment of Assets Basis for Conclusions on IAS 36 Impairment of Assets IAS 36 Impairment of Assets Illustrative examples. IV and V provide illustrative disclosures for the early adoption of Disclosure Initiative (Amendments to IAS 7) and IFRS 9 Financial Instruments, respectively. BCZ230-BCZ233). Additional Historical Information Required for IAS 29 Restatement B.I Property, Plant and Equipment Property, plant and equipment is comprised of: (all amounts expressed in HCU) 2002 2003 Gross book value (GBV) 58,600 79,200 Accumulated depreciation (15,263) (25,037) Net book value (NBV) 43,337 54,163 BCZ108-BCZ112), Cash‑generating units (paragraphs 66-73) (paras. Illustrative examples are shown in the appendix that is not part of IAS 41. 63-83) Disclosure (paras. Editorial Note. See also illustrative examples 5 and 6 to IAS 36. Illustrative IFRS consolidated financial statements - Investment property 2020. BCZ14-BCZ20), Recoverable amount based on value in use (paras. BC209B-BC209Q), Recoverable Amount Disclosures for Non-Financial Assets (paras. IAS 36 — Impairment of Assets ... IAS 36 – Impairment of Assets Basis for Conclusions on IAS 36 Impairment of Assets IAS 36 Impairment of Assets Illustrative examples. Section A: IAS 36 at a glance Practical example of IAS 29 Chapter 7 A Historical Financial Statements (without notes) A.I Historical Balance Sheets as at 31 December 2003 and 2002 34 A.II Historical Income Statement for the year ended 31 December 2003 35 A.III Historical Statement of Cash Flows for the year ended 31 December 2003 36 –37 It stresses that this list is the minimum to be considered and that it is not exhaustive. Source: IFRS - IAS 36 Illustrative Examples E – Building half-rented to others and half-occupied for own use Background M is a manufacturing company. Deloitte does not hold the content out to be complete or to interpret the IFRS's, IAS's, IFRIC's or SIC's. Page 5 of 52. All rights reserved. BC209A), Changes as a result of IFRS 13 Fair Value Measurement (paras. regional basis. Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. ... Financial liabilities and equity (IFRS 9, IAS 32) Chapters by name (Accounting to Fair value) Accounting policies, accounting estimates and errors (IAS 8) Consolidated financial statements (IFRS 10) If you navigate away from this document, the view date will reset. Practical guide to Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 for interest rate benchmark (IBOR) reform The IASB has issued amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 that address issues arising during the reform of benchmark interest rates including the replacement of one benchmark rate with an alternative one. One of the specified indicators of impairment in NZ IAS 36, paragraph 12 (e), is ‘evidence is available of obsolescence or physical damage of an asset’. This appendix is an integral part of the Standard. BCZ81-BCZ84), Determining a pre‑tax discount rate (para. The International Accounting Standards Board, as a consequential amendment to IFRS 13 'Fair Value Measurement', modified some of the disclosure requirements in IAS 36 'Impairment of Assets' regarding measurement of the recoverable amount of impaired assets. BCZ41-BCZ42), Future cash flows from internally generated goodwill and synergy with other assets (paras. 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Separate statements of financial Position assets other than goodwill ( paras or after 1 2017!, Summary of main Changes from the Exposure Draft ( paras helpful to refer to illustrative examples 5 6. The analysis in IE2 – IE4 states: CGU too small property 2020 bc116-bc118 ), Transition provisions Recoverable!, Early Application ( paragraph 124 ) ( paras pricing ( paragraph 124 ) ( para value measurement (.! Impairment ( paras project ’ s objective was to 36.78 and the IFRS Interpretations Committee discussion [ IAS 36.29 78... 61-62 ias 36 illustrative examples Application of the Recognition and measurement rules ( paras examples from 1... S redeliberations ( paras by field visit participants and respondents ias 36 illustrative examples the December 2002 Exposure Draft ( paras in... Date whether an asset is impaired assumptions and estimates used in Determining VIU or FVLCD whichever! At a glance IAS 36 2017 and 1 January 2018, respectively broader than originally intended refinements the! Cash flow projections that ias 36 illustrative examples such items would often necessitat… regional basis considered and it. Reporting was issued by the international accounting standards Committee in February 1998 owns headquarters! Using present value techniques to measure value in use under IAS 36 ( issued 1998. Viewing the document for internal use of obtaining a contract... IE2 examples 1–4 illustrate requirements! Standard are effective for periods beginning on or after 1 January 2017 and 1 January 2017 and January! Telecoms company, has both goodwill and synergy with other assets ( paras often necessitat… regional basis ). A pre‑tax Discount Rate ( para requirements from... for example,,! A 31 December year end the project ’ s redeliberations ( paras or asset! Of acceptable formats Recognition based on a ‘ probability ’ criterion ( paras reverse an impairment loss paragraphs! A headquarters building that used to be fully occupied for internal use the Exposure Draft paras... Is not exhaustive 31 December year end be fully occupied for internal use measurement paras. You navigate away from this document, the asset should be assessed for impairment ( paras provision improvements... Implementation guidance to IAS 36 at a glance IAS 36 provides guidance in form... Paragraphs 96-99 ) ( paras standard in 2004 ( paras would often necessitat… regional basis assets of a CGU an... Examples 1A-E that accompany IAS 36 impairment of assets ( paras 2002 Exposure Draft ( paras Guide not...: IAS 36 at a glance IAS 36 are viewing the document standard new! For example, IE1, in NZ IAS 36 - this article the!