International Financial Reporting Standards (IFRS)

IFRS for Small and Medium-sized Entities (SMEs)
Section 27: Impairment of Assets

1. Assets are impaired when recoverable amount is smaller than carrying amount.

2. Inventories are impaired if (A) is smaller than carrying amount
--> (A) selling price less costs to complete and sell

3. Previously recognised impairment losses for inventories
--> can be reversed if (A) increases

4. Impairment loss is recognised in profit or loss.

5. At the end of each reporting period
--> check if there is an indication of impairment

6. If there is any indication of impairment
--> estimate recoverable amount

7. Estimation of recoverable amount is not necessary
--> if there is no indication of impairment

8. Examples of impairment indicators

(1) external sources of information
--> decline in market value
--> adverse changes in market environment
--> significant increase in discount rate

(2) internal sources of information
--> evidence of obsolescence
--> plan to discontinue operations

9. Recoverable amount = higher of (B) and (C)
--> (B) fair value less costs to sell
--> (C) value in use

10. Value in use = present value of (D)
--> (D) expected future cash flows

11. Allocation of the impairment loss for a Cash Generating Unit (CGU)

Step 1: allocate to (E)
--> (E) goodwill allocated to CGU

Step 2: allocate to other assets proportionately based on (F)
--> (F) the carrying amount of each asset in CGU

12. Reversal of impairment loss

(1) Impairment loss for goodwill
--> is not reversed

(2) Impairment loss for assets other than goodwill
--> can be reversed
--> if the recoverable amount increases later