IFRS

Applying IAS 36 in practice

IAS 36: Impairment of Assets: A guide to applying IAS 36 in practice

International Accounting Standard 36 ‘Impairment of Assets’ (IAS 36, the Standard) is not new. In fact, the Standard was first issued in 1998 and later revised in 2004 and 2008 as part of the International Accounting Standards Board’s (IASB’s) work on the business combinations project. Since then only minor consequential amendments have been made.

However, although IAS 36’s requirements are familiar, the impairment review remains challenging in practice. IAS 36’s guidance is detailed, prescriptive and complex in some areas. Putting this guidance into practice involves making long-term estimates of uncertain future performance and the valuation of assets and operations for which observable prices are often not available. This also requires a significant degree of professional judgement. Against this background, financial statement users, regulators and accounting enforcement bodies continue to raise concerns about the rigour of entities’ impairment assessments, the supportability of their underlying assumptions and the transparency of the related disclosures. In view of these challenges, a reminder of IAS 36’s requirements and key application issues is time well spent.

Fortunately, Grant Thornton has gained extensive insights into the application of IAS 36. Grant Thornton International Ltd, through its IFRS team, develops general guidance that supports the Grant Thornton member firms’ commitment to high quality, consistent application of IFRS. We are pleased to share these insights by publishing ‘Impairment of Assets: A guide to applying IAS 36 in practice’ (the Guide).

Using the Guide

The Guide has been written to assist management in understanding the requirements of IAS 36 while highlighting some common areas of confusion seen in practice. More specifically it:

  • summarises the overall objective and basic requirements of IAS 36
  • provides a step-by-step guide to performing an impairment assessment, and when required,
  • testing for and/or recording or reversing impairment in accordance with IAS 36
  • highlights interpretative and practical application issues that arise when performing these steps
  • offers insights on best practices to address these issues.
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