IAS 36 Impairment of Assets is not a new standard and its requirements are familiar to preparers; however, impairment reviews remain a challenge 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. Applying IAS 36 requires a significant degree of professional judgement. In this context, financial statement users and regulators continue to raise concerns about the rigour of entities’ impairment assessments, transparency and the related disclosures. In view of these challenges, providing a reminder of IAS 36’s requirements and the key application issues is time well spent.
This 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,
- summarizes the overall objective and basic requirements of IAS 36;
- provides a step-by-step guide to performing an impairment assessment (including testing for an impairment and recording or reversing an impairment loss, when required in accordance with IAS 36);
- highlights interpretative and practical application issues that arise when performing these steps; and
- offers insights on best practices to address these issues
The Grant Thornton International IFRS team has published a new guide, Impairment of Assets: A guide to applying IAS 36 in practice.