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IAS 36- Impairment

Objective

➢Ensure that assets are carried no

more than their recoverable
amount.

➢Define how the recoverable amount

is determined

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✓ PPE (IAS 16)

IAS 36 applies to: ✓ investment property at cost (IAS 40)
✓ intangible assets (IAS 38)
✓ goodwill
✓ subsidiaries, associates, and joint
ventures at cost
✓ Assets at revalued amounts

IAS 36 does not apply ✓ Inventories (IAS 2)

to: ✓construction contracts (IAS 11)
✓ employee benefit (IAS 19)
✓ deferred tax assets (IAS 12)
✓ financial assets (IFRS 9)
✓ non-current assets held-for-sale (IFRS
5)
✓ agricultural assets at FV (IAS 41)
✓Investment property at FV (IAS 40) 3

Related Standards

• IFRS 3 Business combinations

• IAS 16 Property, plant and equipment
• IAS 17 Leases
• IFRS 10 Consolidated Financial Statements
• IAS 27 Equity method in separate financial statements
• IAS 28 Investments in associates
• IAS 31 Interests in joint ventures
• IAS 38 Intangible assets
• IAS 40 Investment property

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Contents

1. Identification of impairment
2. Determining recoverable amount
3. Determining value in use
4. Measuring & recognizing impairment loss
5. Cash Generating Unit
6. Goodwill
7. Corporate asset
8. Reversing an impairment loss

1. Identification of Impairment Terms

giá trị có thể thu hồi
lỗ do suy giảm
•An impairment loss is the amount by which the carrying amount of
an asset or a cash-generating unit exceeds its recoverable amount.
•The recoverable amount of an asset or a cash-generating unit is the
higher of its fair value less costs to sell and its value in use.
giá trị sử dụng
•Value in use is the present value of the future cash flows expected
to be derived from an asset or a cash-generating unit.
giá hợp lí
•Fair value less costs to sell is the amount obtainable from the sale
of an asset or a cash-generating unit in an arm’s-length transaction
between knowledgeable, willing parties less the costs of disposal.
•A cash-generating unit is the smallest identifiable group of assets
for which independent cash flows can be identified and measured.
faỉ value - costs to sell = future economic benefit

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tài sản ko được phép ghi cao hơn giá trị có thể thu hồi được
nếu ghi cao hơn sẽ có tổn thất (impairement loss)

1. Identification of Impairment - when?

Principle: assets are carried at no more than their
recoverable amount.

Carrying amount (CA) Recoverable amount (RA)

(Accounting records)
> (higher of
+Fair value- cost to sell
+Value in use)

CA – RA = Impairment loss
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1. Identification of Impairment

Recoverable amount (RA) =Higher of asset’s / CGU’s

Fair value less cost to sell Value in use

giá trị hợp lí trừ chi phí bán

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1. Identification of Impairment
Example: At the end of March 20X2, a machine has
+ carrying amount of $10,000.
+ market value of $9,000 and cost of disposal is 1,000.
This machine is expected to produce net cashflow of $3,000 per
year for the next 3 years, the cost of capital is 8%
Is there an impairment of the machine?
Fair value – cost to sell = 9,000 – 1,000 = 8,000
Value in use = Present Value (8%, 3 years , $3,000)= $7,731
Recoverable Amount = ? 8000
impairment loss 2000

1. Identification of Impairment – When?

Indication of impairment At the end of each reporting

period

Văn bản
Intangibles with indefinite useful life
Annual test for Impairment
Intangibles not yet available for use
lợi thế thương mại
Goodwill acquired in combination Annual test for Impairment
vd:quyền sd đất vô thời hạn => indefinite (ko giới hạn). Những
TS này ko tính khấu hao nên chúng ts phải làm test tổn thất
hằng năm

mua cty A, có TS theo fair value: 100, mà tui sẵn sàng mua A với giá
110 để mua. Tại vsao tụi bỏ thêm 10đ? Vì khi tui mua một company tui
ko chỉ mua ts mà còn mua những lợi thế của nó, và cái lợi thế đó ngta10
gọi là một loại ts đó là “goodwill”
Hay “goodwill” là số tiền chênh lêch bạn bỏ ra mua cty với giá trị của
cty đó

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khi nào phải làm impairment

1. Identification of Impairment – When?

Indication of impairment

External sources Internal sources

✓ Decline in market value ✓ Obsolescence / physical

✓ Significant changes biến động lớn damage
(Market, technology, legal, ✓Significant changes
economic) (restructuring,
✓ Increase in interest rates discontinuing)
✓ CA> market capitalization ✓Internal reporting evidence
- giá thị thường của ts giảm
=> ảnh hưởng đến fair value
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- lãi suất tt tăng => lạm phát tăng =>future
cash flow ko đổi => giá trị htai của ts bị
giảm

1. Identification of Impairment- What?

If possible An individual asset

If not possible A cash generating unit

An individual asset is NOT possible to be estimated its recoverable

amount, because:
➢ fair value less costs to sell cannot be estimated to be close
to the asset’s value.
➢ value in use can not be determined, because of the asset
does not generate cash inflows that are largely
independent of those from other assets. [IAS 36.66, 67]
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1. Identification of Impairment- What?

Cash generating unit (CGU)

= Smallest identifiable group of assets that generates cash

inflows largely independent from other assets

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Cash generating unit Example

• A mining company owns a private

railway that it uses to transport output
from one of its mines. The railway now
has no market value other than as scrap,
and it is impossible to identify any
separate cash inflows with the use of the
railway itself. Consequently, if the
mining company suspects an impairment
in the value of the railway, it should treat
the mine as a whole as a cash generating
unit, and measure the recoverable
amount of the mine as a whole.

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Cash generating unit Example

A bus company has an arrangement with a

town's authorities to run a bus service on four
routes in the town. Separately identifiable
assets are allocated to each of the bus routes,
and cash inflows and outflows can be
attributed to each individual route. Three
routes are running at a profit and one is
running at a loss. The bus company suspects
that there is an impairment of assets on the
loss making route. However, the company
will be unable to close the loss-making route,
because it is under an obligation to operate
all four routes, as part of its contract with the
local authority.
cty có 4 tuyến bus (có thu nhập cp riêng), 3 tuyến đầu lời, tuyến sau lỗ
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2. Determining Recoverable Amount - Note

• The recoverable amount of an asset or a cash-generating

unit is the higher of its fair value less costs to sell and its
value in use.
• If fair value less costs to sell or value in use is more than
carrying amount, it is not necessary to calculate the other
amount. The asset is not impaired. [IAS 36.19]

• If fair value less costs to sell cannot be determined, then

recoverable amount is value in use. [IAS 36.20]

• For assets to be disposed of, recoverable amount is fair

value less costs to sell. [IAS 36.21]
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1. Identification of Impairment Example:

Carrying Fair Value in Recoverabl Impairment

amount value use e amount loss
less
costs to
sell
Asset A 10.000 12.000 18.000 18.000 -
Asset B 7.000 11.500 n/d 11.500 -
Asset C 8.500 6.500 7.000 7.000 1.500
Asset D 12.750 n/d 16.800 16.800 -
Asset E 10.000 14.000 12.000 14.000 -
Asset F 21.000 15.000 10.000 15.000 6.000

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3. Determining Value in use

Value in use = Present value of the future cash flows expected to be

derived from an asset/CGU

Future cash flows (Variation)

Discount rate
Time value of money Risk specific to asset
uncertainty

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3. Determining Value in use Future cash flows

Assumptions
Future cash flows Recent budgets/ forecasts
Extrapolation

• Cash inflows from continuing use

include • Necessary and directly attributable cash outflows
•Net cash flows from disposal

• Future restructuring if not yet committed

•Improving/ enhancing performance
Not include •Receivables/ Payables provisions or pensions
•Financial activities
•Income tax
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3. Determining Value in use Future cash flows

Most likely
1

Methods to cash flows from use and

Determining disposal discounted
Expected value
cash flows using risk-adjusted
2
of cash flows:
discount rate.
Probability-
weighted
EX: Estimated cash flows with a 40% probability they will be $120 and a 60%
probability they will be $80. Value in use?
• Method 1: Most likely cash flows = $80. This amount is discounted using
a rate that takes into account all risks including the uncertainty of the cash
flow amounts.
• Method 2: Expected value of cash flows = (120 × 40%) + (80 × 60%) =
$96. This amount is discounted using a rate that includes remaining risks.20

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3. Determining Value in use Discount rate

Discount rate is pre- tax rate

be determined

Time value of money and Risk specific to asset

- Which the future cash flow estimates
have not been adjusted.

1. Market rate
2. When no market rate: -Weighted average cost of capital (WACC)
- Incremental borrowing rate
Market rates for equity are -Other market borrowing rate
usually stated post-tax
Pre-tx rate = Post-tax rate
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/(1- tax rate)

3. Determining Value in use - EX

1. Future cash flows 2. Discounting

Year Future cash flows Discount factor at 10% Present value

1 3.000 0,909 2.727
2 2.800 0,826 2.314
3 2.500 0,751 1.878
4 2.000 0,683 1.366
5 1.200 0,621 745
Total 11.500 9.031
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4. Measuring & recognizing impairment loss

Carrying Recoverable
Impairment loss amount amount

giá gốc - khấu hao nếu bị impair thì sẽ ghi nhận vào bc lãi lỗ của cty
Cost model Debit: P/L – Impairment loss
Credit: Asset (adjustment)

Revaluation model Debit: OCI (Revaluation surplus)

dựa trên fair value (giá thị trường) - khấu hao Or P/L (Impairment loss)
và cuối năm giá tt biến động thì đánh giá lại Credit: Asset

Adjust depreciation for future periods to new carrying amount

giảm giá trị ts và ghi vào lãi lỗ => gọi là chi phí E 23

ghi sổ tổn thất của nhóm TS

ĐƠN VỊ TẠO TIỀN thì phải tách ra ghi từng TS
5. Cash Generating Unit (CGU) IAS 36.105

CGU is the smallest identifiable group of asets that

generates cash inflows largely independent from other
CGU shall be identified consistently

CA of CGU
(include GW) > RA of CGU

Impairment loss
Basis: carrying amount
be allocated
(pro rata)
the highest of:
the assets of CGU (a) its fair value less costs to sell (if
determinable);
first, goodwill
(b) its value in use (if determinable);
then, the other assets (c) zero.
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6. Goodwill

Testing of CGU with Goodwill

Testing annually or whenever there

Goodwill
is an indication of impairment
Allocation to CGUs

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7. Corporate assets

RA of an individual corporate asset cannot be

determined ➔ RA is determined for the CGU or
group CGU units to which the corporate asset
belongs.

Building of a headquarters
➢ Identify all the corporate assets that relate
Division of the entity to the cash-generating unit
EDP equipment
Research centre. ➢ CA of a corporate asset can be allocated
on a reasonable and consistent basis to
that CGU.

➢ compare the CA of CGU (including CA of

the corporate asset) with RA of CGU.
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Xử lí impair loss cho đơn vị tạo tiền

Example
• CGU which has carrying amount of
– Asset A: 100 **chia cho goodwill (ko phân bổ theo tỉ
– Asset B: 50 lệ) trước rồi mới chia cho những ts còn lại

– Goodwill : 30
• CGU’s Recoverable amount: 120
• Required: Allocate the impairment loss of CGU to
each asset!
Impairment loss: (100+50+30)-120=60 (carrying amount - recoverable amount)
Allocate to
Journal entry: (cost model)
Goodwill: 30 Dr : 60
Asset A = (100/150)x30 Cr asset A. 20
Asset B = (50/150)x30 Cr asset B: 10 27

Cr goodwill: 30
(nhân cho 30 là vì impair 60 và
đã phân bổ cho goodwill hết 30
nên còn 30 )

8. Reversing an impairment loss

Is there any indication that impairment loss no longer exits?

External sources Internal sources

✓Increase in market value ✓Significant changes Văn bản

✓Significant changes (restructuring,
(Market, technology, legal, enhancement)
economic) ✓Internal reporting
✓Decrease in interest rates evidence

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6. Reversing an impairment loss

shall be reversed if and only if when change in estimates to determine RA

the amount or timing of cash flows

the discount rate;
components of fair value less costs to sell

✓ ✓ x chỉ được ghi

khi nó mua.
còn những
Individual asset CGU Goodwill goodwill
đang vận
hành ko được
- Increased CA <= original CA - Allocation to assets pro rata ghi nhận
No
-P/L, or revaluation increase (No goodwill)
reversal
- depreciation: new CA CA of asset shall not be ko hoàn nhập
increased above the lower of:
[IAS 36. 117-120]
RA & Original CA
E 29
At the begining of year 1, purchase ppe costs 1000CU, 10 years straight line depreciation.
At the end of year 2: RA:640 Cost model
At the end of year 3: RA: 900

Văn bản

END OF TOPIC 3

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