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8 indicators of asset impairment.

The purpose of IAS 36 (impairment of asset) is to provide entities with guidance to determine whether an asset is impaired and how the impairment should be recognized.

When assessing whether there is an impairment, IAS 36 requires that the following factors should be considered by an entity;

External factors

  • An expected decline in the asset market values.
  • Significant changes in technology, market, economic factors or laws and regulations that have an adverse effect on the entity.
  • An increase in interest rates, affecting the value in use of the asset.
  • Whether the carrying amount of the net asset of the entity is more than its market capitalization.

Internal factors

  • Evidence that the asset is damaged or no longer of use to the entity.
  • There is a plan to discontinue or restrict the operations for which the asset is currently used.
  • There is evidence from internal reporting indicating that the asset is performing worse than expected.

7 thoughts on “8 indicators of asset impairment.”

  1. Pingback: Revision question on professional skepticism, impairment of goodwill, and procedures used to perform a forensic investigation. – ACCOUNTING CLASS

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