Ifrs ias 36 applies to the following assets. Accounting for an impairment loss on an asset in the impairment account is required because the accumulated impairment loss can be reversed in the future. Asset use value

Practically all assets, both current and non-current, are subject to impairment testing. Standard IAS 36 “Impairment of Assets” (Appendix 23 to Order of the Ministry of Finance of the Russian Federation No. 217n dated December 28, 2015) identifies those that may be impaired and determines the accounting and disclosure procedure for such items.

IAS 36 Impairment of Assets - Fundamentals

In the context of IAS 36 Impairment of Assets, terms are used. So:

• book value (BC) the accounting price of the item is recognized less accrued depreciation and impairment loss;
• fair value (CC) is the price that could be received when an item is sold or an obligation is transferred to a third party in an orderly transaction;
• recoverable amount (BC) is CC minus the costs of disposal or value in use (the largest indicator is taken). VS are calculated for individual assets, or for their groups - the so-called cash generating units;
• impairment loss (MA) is the difference between the carrying amount and the recoverable amount.

The scope of the standard applies to all types of assets, but excluding the following:

• Subjects regulated by contracts (IFRS 15);
• Deferred tax assets (IFRS 12);
• Assets arising from personnel settlements (IFRS 19);
• Financial assets accounted for as financial instruments (IFRS 9);
• Immovable investment objects, which are assessed according to SS (IAS 40);
• Biological assets arising in the course of agricultural activities and valued at CC minus selling costs (IAS 41);
• acquisition deferred expenses and intangible assets arising from the rights of the insurer (IFRS 4);
• Non-current assets (or disposal groups) for sale (IFRS 5).

Note! The effect of IFRS 36 is relevant for subsidiaries, joint ventures and associates (terms are defined in IFRS 10, 28, 11).

IFRS IAS 36 Impairment of Assets - Procedure for recognition of loss and measurement

When testing an asset, the carrying and recoverable amounts are compared. In accordance with paragraph 8, an asset is impaired when its carrying value exceeds its recoverable amount. The assessment should be carried out at the end of each reporting period (clause 9). The value of the asset is reduced by the amount of the impairment, or it is allocated among all the assets in the group, and the impairment loss is recognized in the profit / loss account.

If any indication of impairment is identified, the entity is required to estimate the recoverable amount of the item. An open list of influencing external and internal factors is given in clause 12, for example:

• a significantly greater decline in the value of the asset over the period than expected,
• changes in market, economic, legal conditions unfavorable for the company,
• an increase in discount interest rates or other market rates of return on investments,
• obsolescence, or physical damage to the object,
• internal reporting indicators indicate a decrease in the economic efficiency of the asset, etc.

The standard describes in great detail the procedure for assessing the recoverable amount (paragraphs 18-57). The rules for determining the carrying and fair values \u200b\u200bhave been clarified. Separately, the mechanism for the annual assessment of aircraft based on intangible assets with an indefinite useful life and the procedure for calculating the CC minus the costs of disposal of the object are given.

Clause 30 identifies the elements considered in value-in-use calculations, including:

• an estimate of the expected cash flows from use of the asset and possible fluctuations in their amounts,
• the price, taking into account the risk of uncertainty inherent in the asset,
• illiquidity and other factors.

The statutory requirements for measuring and recognizing the amount of an impairment loss are contained in cl. 58-64. Disclosure of data should be carried out by types of assets, that is, objects that are similar in the method and nature of operation. An impairment loss is recognized in profit / loss, unless the asset is measured at a revalued amount in accordance with another IFRS.

An entity shall determine at the end of each reporting period whether an impairment loss recognized in prior periods has decreased. The procedure for recovering such a loss is defined in cl. 109-125 standard.

In general, the objective of IAS 36 is to create an accounting treatment for assets under which their carrying amount does not exceed the recoverable amount, as well as a procedure for recovering an impairment loss and disclosures.

66 If there is any indication that an asset may be impaired, the recoverable amount of the individual asset shall be estimated. If it is not possible to estimate the recoverable amount of an individual asset, the entity determines the recoverable amount of the cash-generating unit to which the asset belongs (the cash-generating unit of the asset).

67 The recoverable amount of an individual asset cannot be determined if:

(a) the asset's value in use cannot be estimated to approximate its fair value less costs of disposal (for example, if the future cash flows from continuing use of the asset cannot be estimated to be negligible); and

(b) the asset does not generate cash inflows that are largely independent of those from other assets.

In such cases, the value in use and therefore the recoverable amount can only be determined for the cash-generating unit of the asset.

Example

The mining organization owns a private railway to support its mining activities. A private railroad can only be sold for scrap metal and does not generate cash inflows that are largely independent of those from other mine assets.

It is not possible to estimate the recoverable amount of a private railroad because its value in use cannot be determined and is likely to differ from the value of scrap metal. Consequently, the entity estimates the recoverable amount of the cash-generating unit to which the railway belongs, that is, the mines as a whole.

68 In accordance with paragraph 6, a cash-generating unit for an asset is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of those from other assets or groups of assets. Judgment is used to identify the cash-generating unit of an asset. If recoverable amount cannot be determined for an individual asset, the entity identifies the smallest pool of assets that generates substantially independent cash inflows.

Example

The bus company provides services under an agreement with the municipality that stipulates a minimum amount of service on each of five separate routes. The assets allocated for each route and the cash flows from each route can be identified separately. On one of the routes, the organization operates at significant losses.

Since an entity cannot cut any of the bus routes, the lowest level of identifiable cash inflows that are largely independent of cash inflows from other assets or groups of assets are cash inflows from the five routes combined. For each route, the cash-generating unit is the bus company as a whole.

69 Cash inflows are inflows of cash and cash equivalents received from parties external to the entity. When determining whether the cash inflows from an asset (or group of assets) are largely independent of the cash inflows from other assets (or groups of assets), an entity considers various factors, including how management controls the entity's performance (for example, product lines , by type of activity, by location of individual units, districts or regions), the procedure for making management decisions on the continued use or disposal of the organization's assets and types of activities. Illustrative example 1 focuses on the identification of a cash-generating unit.

70 If there is an active market for a product produced by an asset or group of assets, that asset or group of assets is identified as a cash-generating unit, even if some or all of the output is used internally. If the cash inflows generated by an asset or cash-generating unit are dependent on internal transfer prices, an entity shall use management's best estimate of the future price (s) that would be achieved in arm's length transactions when calculating:

(a) future cash inflows used to determine the value in use of the asset or cash-generating unit; and

(b) future cash outflows used to determine the value in use of other assets or cash-generating units that are affected by internal transfer prices.

71 Even if all of the output (or part of the output) produced by an asset or group of assets is used by other cash-generating units of the organization (for example, products at an intermediate stage of production), the asset or group of assets forms a separate cash-generating unit if the entity could sell the output. in an active market. This is because an asset or group of assets could generate cash inflows that would be largely independent of cash inflows from other assets or groups of assets. When using information based on financial budgets / projections for such a cash-generating unit or other asset or cash-generating unit that is affected by internal transfer prices, an entity shall adjust that information if internal transfer prices do not reflect management's best estimate of future prices that could be secured in transactions between independent parties.

72 For the same asset or asset types, cash-generating units shall be identified sequentially from one period to the next, unless a change is warranted.

73 If an entity determines that an asset relates to a cash-generating unit other than the unit to which it was related in prior periods, or that the types of assets combined in an asset's cash-generating unit have changed, the paragraph requires disclosure of that cash-generating unit, if applicable. an impairment loss is recognized or reversed.

Recoverable amount and carrying amount of the cash-generating unit

74 The recoverable amount of a cash-generating unit is its fair value less costs of disposal or value in use, whichever is the greater. In the context of determining the recoverable amount of a cash-generating unit, any reference in paragraphs - to an “asset” applies to a “cash-generating unit”.

75 The carrying amount of a cash-generating unit is determined in accordance with the method for determining the recoverable amount of a cash-generating unit.

76 Carrying amount of a cash-generating unit:

(a) includes the carrying amount of only those assets that can be directly allocated or allocated on a reasonable and consistent basis to the cash-generating unit and that will provide future cash flows used in determining the value in use of the cash-generating unit; and

(b) does not include the carrying amount of the recognized liability, unless the recoverable amount of the cash-generating unit can be determined excluding the liability.

This is because the fair value less costs of disposal and value in use of a cash-generating unit are determined excluding the cash flows associated with assets that are not part of the cash-generating unit and recognized liabilities (see paragraphs i).

77 In the case of a grouping of assets, it is important for the estimation of recoverable amount to include in a cash-generating unit all assets that generate or would normally provide the related cash inflows. Otherwise, the cash-generating unit may appear to be fully recoverable when in fact it has incurred an impairment loss. In some cases, although some assets contribute to the estimated future cash flows of a cash-generating unit, they cannot be allocated to such a cash-generating unit on a rational and consistent basis. This can happen for goodwill or corporate assets such as head office assets. Paragraphs - provide an explanation of what to do with such assets when testing a cash-generating unit for impairment.

78 It may be necessary to analyze some of the recognized liabilities to determine the recoverable amount of a cash-generating unit. This may be the case where the disposal of the cash-generating unit would require the buyer to assume a liability. In this case, the cash-generating unit's fair value less costs of disposal (or the estimated cash flows from eventual disposal) is the selling price of the cash-generating unit's assets and liabilities together, less costs of disposal. To make a reasonable comparison between the carrying amount of the cash-generating unit and its recoverable amount, the carrying amount of the liability is deducted in determining both the cash-generating unit's value in use and its carrying amount.

Example

The company operates a mine in a country where the law provides that at the end of the mining activity, the owner must restore the site. Restoration costs include the restoration of overburden that must be removed prior to production. An estimated liability for overburden recovery costs was recognized as the overburden was removed. The amount of the estimated liability was included in the cost of the mine and is amortized over the useful life of the mine. The carrying amount of the estimated remediation cost liability is CU500. (a) which is equal to the present value of the restoration costs.

The entity is testing the mine for impairment. The cash-generating unit for a mine is the entire mine itself. The entity received several offers to purchase the mine at a price of about CU800. This price reflects the buyer's commitment to the overburden restoration. The cost of disposing of a mine is negligible. The mine has a value in use of approximately CU1,200 excluding refurbishment costs. The mine has a carrying amount of CU1,000.

The cash-generating unit's fair value less costs of disposal is CU800. This amount takes into account restoration costs for which a provision has already been made. Consequently, the value in use of the cash-generating unit is determined after remediation costs have been taken into account and is calculated to be CU700. (CU1,200 minus CU500). The carrying amount of the cash-generating unit is CU500, which includes the carrying amount of the mine (CU1,000) less the carrying amount of the remediation cost estimate (CU500). Consequently, the recoverable amount of the cash-generating unit exceeds its carrying amount.

(a) In this Standard, monetary amounts are denominated in “currency units” (CU).

79 For practical reasons, the recoverable amount of a cash-generating unit is sometimes determined after accounting for assets that are not part of the cash-generating unit (for example, receivables or other financial assets) or recognized liabilities (for example, payables, pension liabilities and other provisions). In such cases, the carrying amount of the cash-generating unit is increased by the carrying amount of those assets and decreased by the carrying amount of such liabilities.

Goodwill

Allocation of goodwill to cash-generating units

80 For the purposes of an impairment test, goodwill acquired in a business combination shall, from the acquisition date, be allocated to all of the acquirer's cash-generating units or groups of cash-generating units expected to benefit from the synergy resulting from the combination, regardless of whether other assets are allocated and liabilities of the acquiree to these units or groups of units. Each unit or group of units to which goodwill is thus allocated must:

(a) represent the lowest level of the entity at which goodwill can be tracked for internal management purposes; and

(b) be no larger than an operating segment prior to aggregation, as defined in paragraph 5 of IFRS 8 Operating Segments.

81 Goodwill recognized in a business combination is an asset that represents the future economic benefits of other assets acquired in a business combination that cannot be individually identified and recognized separately. Goodwill does not generate cash flows independently of other assets or groups of assets, but often participates in the cash flows of many cash-generating units. Sometimes goodwill cannot be reasonably allocated among individual cash-generating units, but only among groups of cash-generating units. Therefore, the lowest level of an entity at which goodwill is tracked for internal management purposes is sometimes the set of cash-generating units with which it is associated but among which it cannot be allocated. In paragraphs - and, references to a cash-generating unit to which goodwill is classified are also considered to be references to a group of cash-generating units to which goodwill is classified.

82 Applying the requirements in paragraph results in goodwill being tested for impairment at a level that reflects the way the entity operates and with which goodwill may naturally be associated. Therefore, there is usually no need to develop additional reporting systems.

83 A cash unit to which goodwill is allocated for impairment testing purposes may not be the same as the level to which goodwill is allocated in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates for the purpose of measuring foreign exchange gains and losses. For example, if, in accordance with IAS 21, an entity is required to attribute goodwill to relatively low levels in order to measure foreign exchange gains and losses, it is not required to test goodwill for impairment at that level if it does not track goodwill at that level. for internal management purposes.

84 If the initial distribution of goodwill acquired in a business combination cannot be completed before the end of the annual period in which the business combination occurred, that initial distribution shall complete before the end of the first annual period commencing after the acquisition date.

86 If goodwill is allocated to a cash-generating unit and the entity disposes of the operation of that unit, the goodwill associated with the disposed of:

(a) included in the carrying amount of operations when determining gain or loss on disposal; and

(b) measured by reference to the relative cost of the operation disposed of and the portion of the cash-generating unit retained, unless the entity can justify the use of some other method that better reflects the goodwill associated with the disposed of the operation.

Example

The entity sells for CU100. an activity that was part of a cash-generating unit to which goodwill was allocated. Goodwill allocated to this unit cannot reasonably be identified or related to a group of assets below the unit itself. The recoverable amount of the remainder of the cash-generating unit is CU300.

Since the goodwill allocated to a cash-generating unit cannot be identified or related to a group of assets lower than the unit itself, the goodwill associated with a disposed of is measured based on the relative value of the disposed of and the remainder of the unit. Therefore, 25 percent of the goodwill allocated to the cash-generating unit is included in the carrying amount of the activity sold.

87 If an entity reorganizes its reporting structure in such a way that it changes the composition of one or more of the cash-generating units to which goodwill has been allocated, then the goodwill must be reallocated between the units affected by the reorganization. The reallocation of goodwill is made using the relative value method, similar to that used when an entity liquidates an activity that is part of a cash-generating unit, unless the entity can justify a different method that better reflects the goodwill associated with the reorganized units.

Example

Goodwill was previously attributed to cash-generating unit A. Goodwill attributed to A cannot reasonably be identified or related to a group of assets lower than A. Unit A must be split and integrated into three other cash-generating units - B, C and D.

Since the goodwill allocated to A cannot reasonably be identified or related to a group of assets lower than A, it is reallocated between B, C and D based on the relative value of the three parts of A prior to their integration into B, C and D ...

Impairment testing of cash-generating units in which goodwill is included

88 If, as noted in paragraph, goodwill is associated with a cash-generating unit but is not allocated to that unit, that unit shall be tested for impairment, if there is any indication that it may be impaired, by comparing the unit's carrying amount, excluding goodwill, with its reimbursable amount. An impairment loss shall be recognized in accordance with paragraph.

89 If a cash-generating unit described in paragraph includes in its carrying amount an intangible asset that has an indefinite useful life or is not yet ready for use, and such an asset can be tested for impairment only as part of a cash-generating unit, paragraph requires that such cash-generating unit the unit was also tested annually for impairment.

90 A cash-generating unit to which goodwill is allocated shall be tested for impairment annually and, if there is any indication of impairment, by comparing the unit's carrying amount, including goodwill, with its recoverable amount. If the unit's recoverable amount exceeds its carrying amount, that unit and the associated goodwill are considered to be unimpaired. If the unit's carrying amount exceeds its recoverable amount, the entity recognizes an impairment loss in accordance with paragraph.

91 - 95 [Deleted]

Impairment Test Timing

96 An annual impairment test for a cash-generating unit to which goodwill is attributed may be performed at any time during the annual period, provided that such test is performed at the same time each year. Different cash-generating units may be tested for impairment at different times. However, if goodwill, or part of it allocated to a cash-generating unit, is acquired in a business combination during the current annual period, that unit must be tested for impairment by the end of the current annual period.

97 If the assets that make up the cash-generating unit to which goodwill is allocated are tested for impairment at the same time as the unit containing the goodwill, they shall be tested for impairment before the unit containing the goodwill is tested. Similarly, if the cash-generating units that make up the group of cash-generating units to which goodwill has been allocated are tested for impairment at the same time as the group of units containing goodwill, the individual units must be tested for impairment before the group of units containing the goodwill is tested for impairment. goodwill.

98 At the time of the impairment test for the cash-generating unit to which goodwill is allocated, there may be an indication that an asset in the unit containing goodwill was impaired. In such a case, the entity tests the asset for impairment and recognizes an impairment loss on that asset before testing for impairment a cash-generating unit containing goodwill. Likewise, there may be indications that a cash-generating unit that is a group of units containing goodwill may be impaired. In such a case, the entity first tests the cash-generating unit for impairment and recognizes an impairment loss for that unit prior to performing an impairment test for the group of units to which the goodwill is allocated.

99 The most recent detailed calculation of the recoverable amount of a cash-generating unit to which goodwill has been allocated in a prior period may be used to test for impairment of that unit in the current period provided the following criteria are met:

(a) the assets and liabilities that make up the unit have not changed materially since the last recoverable amount calculation;

(b) the most recent calculation resulted in the recoverable amount being significantly higher than the carrying amount of the unit; and

(c) based on an analysis of events that have occurred since the last recoverable amount calculation and circumstances that have changed since that time, it is unlikely that the current recoverable amount will be below the unit's carrying amount.

Corporate assets

100 Corporate assets include group or divisional assets, such as an organization's headquarters or divisions, electronic data processing equipment, or a research and development center. The structure of an entity affects whether an asset meets the definition of corporate assets for a particular cash-generating unit in this Standard. A distinctive feature of corporate assets is that they do not generate cash inflows independently of other assets or groups of assets and their book value cannot be fully attributed to the cash-generating unit under consideration.

101 Because corporate assets do not generate cash inflows by themselves, the recoverable amount of individual corporate assets cannot be determined unless management decides to dispose of the asset. Consequently, if there is any indication that a corporate asset may be impaired, the recoverable amount is determined for the cash-generating unit or group of cash-generating units to which the asset belongs and compared to the carrying amount of that cash-generating unit or group of cash-generating units. An impairment loss is recognized in accordance with paragraph.

102 In testing a cash-generating unit for impairment, an entity identifies all corporate assets that are associated with the cash-generating unit in question. If part of the carrying amount of the corporate asset:

(a) can be allocated to that unit on a reasonable and consistent basis, the entity compares the carrying amount of the unit, including the portion of the corporate asset's carrying amount allocated to the cash-generating unit, with its recoverable amount. Impairment losses shall be recognized in accordance with paragraph;

(b) cannot be reasonably and consistently allocated to such a unit, the entity:

(i) compares the carrying amount of the unit, excluding the corporate asset, with its recoverable amount and recognizes an impairment loss in accordance with paragraph;

(ii) identifies the smallest group of cash-generating units to which the cash-generating unit under consideration belongs and to which a portion of the carrying amount of the corporate asset can be allocated on a reasonable and consistent basis; and

(iii) compares the carrying amount of that group of cash-generating units, including the portion of the carrying amount of the corporate asset allocated to that group of units, with the recoverable amount of that group of units. An impairment loss shall be recognized in accordance with paragraph.

103 Illustrative Example 8 illustrates the application of these requirements to corporate assets.

Impairment loss for a cash-generating unit

104 An impairment loss is recognized for a cash-generating unit (the smallest group of cash-generating units to which goodwill or a corporate asset is allocated) only if the recoverable amount of the unit (group of units) is less than the carrying amount of the unit (group of units). An impairment loss is credited to a decrease in the carrying amount of the assets of a unit (group of units) as follows:

(a) first to reduce the carrying amount of goodwill allocated to the cash-generating unit (group of units); and

(b) then to other assets of the unit (group of units) in proportion to the carrying amount of each asset in the unit (group of units).

These decreases in the carrying amount shall be treated as an impairment loss on the individual assets and recognized in accordance with paragraph.

105 In allocating an impairment loss in accordance with paragraph, an entity shall not reduce the carrying amount of an asset to below the higher of:

(a) its fair value less costs of disposal (if it can be measured);

(b) its value in use (if it can be determined); and

The amount of the impairment loss that would otherwise have been attributed to the asset must be allocated on a pro rata basis to the other assets of the unit (group of units).

106 If the recoverable amount of each individual asset of a cash-generating unit cannot be estimated, this Standard prescribes an arbitrary allocation of an impairment loss to that unit's assets, other than goodwill, because all assets of a cash-generating unit work together.

107 If the recoverable amount of an individual asset cannot be determined (see paragraph):

(a) an impairment loss is recognized for an asset if its carrying amount is greater than the higher of its fair value less costs of disposal or distributions described in paragraphs and; and

(b) no impairment loss is recognized for the asset if the related cash-generating unit is not impaired. This is applicable even if the asset's fair value less costs of disposal is less than its carrying amount.

Example

The machine suffered physical damage, but it still works, although not as well as it did before it was damaged. The machine's fair value less costs of disposal is less than its carrying amount. The machine does not provide independent cash inflows. The smallest identifiable group of assets that includes a machine and that generates cash inflows that are largely independent of those from other assets is the production line to which the machine belongs. The recoverable amount of a production line indicates that such a production line, taken as a whole, is not impaired.

Assumption 1: Budgets / forecasts approved by management indicate that management has no intention of replacing the machine.

The recoverable amount of the machine alone cannot be estimated because its value in use:

(a) may differ from its fair value less costs of disposal; and

(b) can only be determined for the cash-generating unit to which the machine belongs (production line).

The production line has not depreciated. Consequently, no impairment loss is recognized for the machine. However, the organization may need to revise its estimate of the life or depreciation method of a given machine. A shorter amortization period or an accelerated depreciation method may be needed to reflect the expected remaining useful life of the machine or how the entity expects to manage the economic benefits.

Assumption 2: The budgets / forecasts approved by management reflect management's intention to replace the machine and sell it in the near future. The cash flows arising from the continued operation of the machine prior to its retirement are estimated to be negligible.

The machine's value in use can be estimated as approximating its fair value less costs of disposal. Therefore, the recoverable amount of the machine itself can be determined without taking into account the cash-generating unit to which it belongs (that is, the production line). Because the machine's fair value less costs of disposal is less than its carrying amount, an impairment loss is recognized for the machine.

108 After the requirements in paragraphs have been applied, and for the remaining amount of an impairment loss for a cash-generating unit, a liability shall be recognized only if required by another IFRS.

IAS 36 “Impairment of Assets” describes in detail the procedure for identifying and accounting for impairment of assets. Since international standards require an asset to be reported at a cost that does not exceed the amount of cash flows that the company expects to receive from it in the future.

When to test for impairment

Most assets are tested for impairment only when there is an indication that they may be impaired. Their availability is reviewed at each reporting date.

Indications of impairment in IAS 36

Internal indicators of impairment include:

• obsolescence or physical damage to the asset;
• significant changes in the intensity or use of the asset that have a negative impact on the entity (for example, the idleness of the asset, plans to sell the asset before its earlier expected timing of its disposal);
• indicators that the economic performance of an asset is lower or will be lower than expected.

Even if there is evidence of impairment, an impairment test may not be required. For example, a review would be unnecessary if, according to previous calculations, the asset's recoverable amount significantly exceeded its carrying amount and there were no events to eliminate the difference. Similarly, previous analysis may indicate that an asset's recoverable amount is not sensitive to one or more indicators of impairment.

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How to determine the recoverable amount in accordance with IAS 36

During the audit, the company must determine whether the asset's recoverable amount exceeds its carrying amount. If it exceeds, there is no impairment.

Under IAS 36, the recoverable amount is the higher of:

1. The fair value of the asset less costs of disposal.
2. Asset use values.

Fair value differs materially from value in use. Fair value reflects the assumptions that market participants can use in pricing an asset. Value in use is calculated based on company-specific factors. For example, value in use may reflect synergies between the asset being valued and other assets, legal rights or legal restrictions specific to the company, tax benefits or tax burdens specific to the company.

Note!

Sometimes it is sufficient to calculate only one quantity - either fair value less costs of disposal or value in use of an asset, whichever is easier to determine. If one of these exceeds the carrying amount of the asset, then the asset is not impaired.

Fair value less costs of disposal

Fair value is the price an entity would receive to sell an asset in an orderly transaction between market participants at the measurement date. It is determined in accordance with the requirements of IFRS 13 Fair Value Measurement. Usually this indicator can be estimated even in the absence of quotes for an identical asset in an active market. If fair value cannot be measured reliably, an entity may use its value in use as the asset's recoverable amount.

Cost of disposal IAS 36 understands incremental costs that are directly related to the disposal of an asset. (See also) These may include the costs of legalizing a transaction, pre-sale preparation of an asset, or dismantling costs. But the costs of attracting financing and income tax expenses cannot be considered costs of disposal.

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Value in use in IAS 36

Value in use is the present value of the future cash flows that an entity expects to receive from an asset. To determine the value in use of an asset, IAS 36 suggests:

a) estimate the future cash inflows and outflows arising from the use of the asset and on its subsequent disposal;

b) apply an appropriate discount rate to such future cash flows.

Note!

There is no single methodology for determining cash flows and discount rates. IAS 36 provides general guidance on the calculation of these indicators.

Cash flows are calculated based on the latest financial budgets approved by management. The maximum forecast period is five years, unless a longer period is justified. The point is that detailed and reliable financial budgets for future cash flows over the longer term usually do not exist.

From the end of the five-year forecast period, cash flows are extrapolated to the future until the end of the asset's useful life. For this, a zero or decreasing growth rate is used. In rare cases, an increasing growth rate can be applied. Its use must be justified by objective information about the nature of the life cycle of a product or industry.

Cash flows for calculating value in use will be individual for each company. The calculation includes:

1) cash inflows from the continued use of the asset;

2) the cost of cash (cash outflows) that are required to generate cash inflows from the continuing use of the asset (including overhead costs that can be directly attributed or allocated to the asset). For example, the cost of ongoing repairs and maintenance of an asset;

3) the net cash flow from the disposal of the asset at the end of its useful life. It is determined in the same way as the fair value of an asset less costs of disposal.

Estimates of future cash flows should not include:

1. Cash flows associated with improvements or upgrades to an asset. That is, cash flows are estimated based on the current state of the asset or on the condition of maintaining it in the current state.
2. Expected cash flows from a future restructuring for which there is no obligation yet.

In addition, it does not take into account the cash outflows required to settle obligations for which a provision has already been made; cash flows from financial activities; receipts or payment of income tax .

Note!

In calculating fair value less costs of disposal and value in use, IAS 36 permits the use of estimates, averages and simplified calculations.

What is CGU

It is not always possible to test individual assets for impairment. For example, goodwill cannot be estimated at fair value less costs of disposal. And for individual items of property, plant and equipment it is often impossible to calculate value in use. Because the cash flows used to determine value in use are usually generated not by a specific asset, but by a group of assets. In this case, the impairment test is performed for the group of assets. For this purpose, IAS 36 introduces the concept of a cash-generating unit. (See also ifrs ias 2)

A cash-generating unit (CGU) is the smallest identifiable group of assets that generates cash flows that are largely independent of the cash flows from other assets or groups of assets.

Judgment must be applied to determine the CGU.

Example

The company owns a private railway to support its mining operations. The railroad can only be sold for scrap metal. And cash flows from it cannot be determined separately from flows on other assets of the mine.

The recoverable amount of a private railroad cannot be estimated because its value in use cannot be determined. It probably differs from the cost of scrap metal. Therefore, the company estimates the recoverable amount of the cash-generating unit to which the railway belongs, that is, the entire mine.

CGUs should be determined sequentially from period to period for the same assets or groups of assets, unless the change is justified.

A CGU includes only assets that are directly related to it, or that can be allocated to it on a reasonable and consistent basis. For example, goodwill, corporate assets (headquarters buildings, etc.).

How to account for impairment

If the audit reveals that the recoverable amount is lower than the asset's carrying amount, an impairment loss must be recognized for the difference. The carrying amount of the asset is reduced to the recoverable amount. An impairment loss is recognized in profit or loss. The exception is assets that are accounted for at revalued amounts (for example, fixed assets). An impairment loss on a revalued asset is recognized as a revaluation deduction. The depreciation charge needs to be adjusted according to the revised carrying amount.

If an impairment loss is recognized for a CGU, accounting becomes somewhat more difficult. The impairment loss must be allocated to all assets in the CGU in the following order:

1. First, the carrying amount of the goodwill included in the CGU is reduced.
2. Then the carrying amount of other CGU assets is reduced in proportion to the carrying amount of each asset.

If an individual CGU asset is clearly impaired, the impairment loss must first be attributed to that asset. Then distribute the remaining amount among the other assets of the CGU. It is important to ensure that the carrying amount of each CGU asset does not fall below the highest of the values:

a) fair value less costs of disposal (if measurable);

b) value in use (if it can be determined);

Note!

If only an individual asset within a CGU is impaired, but the CGU as a whole is not impaired, no impairment loss is recognized.

Example

As at 1 January 2018, the company had one CGU, which includes goodwill, land, buildings and equipment with a carrying value of RUB 100, 150, 450 and 300 thousand. respectively. In March 2018, a fire broke out on the territory of the company, as a result of which the equipment was significantly damaged. Its further use is impossible. Because of this, the company estimates the recoverable amount of the CGU at RUB 400,000. The fair value less costs of disposal of the land plot and the building is RUB 120 and 215 thousand. respectively.

The Company determines that an impairment loss should be recognized for the CGU in the amount of RUB 600 thousand. (1000 - 400). Allocate the impairment loss as follows:

Assets	Book value, thousand rubles	Allocation of impairment loss, RUB thous.	Carrying amount after impairment recognition, RUB thous.
Land plot
Equipment
Total

An impairment loss of RR 300 thousand should be recognized first as it can be clearly measured. Further, the book value of goodwill is reduced to zero (loss in the amount of RUB 100 thousand). The remaining amount of the loss is 200 thousand rubles. (600 - 300 - 100) are distributed among other assets of the CGU in proportion to their book value. That is, 50 thousand rubles should be attributed to the land plot. loss (150 / (150 + 450) x 200), and for the building - 150 thousand rubles. (450 / (150 + 450) x 200). However, in this case, the book value of the land plot will be equal to 100 thousand rubles. (150 - 50) and will be below its fair value less costs of disposal (RUB 120 thousand). Therefore, only 30 thousand rubles can be attributed to the land plot. loss. The remaining amount should be attributed to the building - 170 thousand rubles. (200 - 30).

Reversal of an impairment loss

In subsequent periods after the recognition of an impairment loss, an impairment test should also be performed if it is believed that the impairment may continue or the previously recognized loss may decrease.

A reversal of an impairment loss is generally recognized in profit or loss. For assets carried at revalued amounts - as a revaluation increase. However, a goodwill impairment loss cannot be reversed in subsequent periods.

In asset accounting according to Russian and international rules. The main purpose of this IFRS standard is to exclude the overstatement of the book value of non-current (long-term) assets.

The carrying value of non-current assets is the historical value adjusted by the amount of accounting depreciation, which is an estimate and only approximates the change in the value of assets over time. Meanwhile, investors, who are the main users of financial statements, are not interested in abstract figures of value, but in the economic benefits that assets can bring in the future. IAS 36 Impairment of Assets provides assurance that the economic benefits from assets recognized in the financial statements will not be overestimated.

The text of IFRS standards in Russian is published not only on the official website of the Ministry of Finance (located at the bottom of the article), but also on many Internet resources. However, reading the original text of the standards is rather tedious as they are written in professional document language. In this article, I will try to present the essence of the standard in understandable language. For professional judgments in the process of preparing real reports, it is, of course, necessary to refer to the original text of both the standard itself, translated into Russian, and to all additions and explanations that are usually not translated into Russian.

Diploma applicants should pay attention to IFRS 36 both in the December 2015 session and in the future. This standard has never been tested by incumbent examiner Paul Robins on the Dipyfr exam so far. But the same story until June 2015 was with the standard IAS 41 "Agriculture", and in June 2015 the question under IAS 41 appeared immediately by 12 points.

Economic rationale for testing assets for impairment

According to IAS 36 Impairment of Assets, an asset cannot be recognized in the statement of financial position for a greater amount than its recoverable amount. If the carrying amount of an asset cannot be fully recovered through its continued use or through sale, then an impairment of that asset must be recognized (loss in income statement).

Asset impairment indicators

The IAS 36 standard prescribes an asset impairment test (more on that below). Carrying out such a test is a rather laborious procedure, therefore, the standard does not require it to be carried out at the end of each reporting period. An asset impairment test should be performed when there are indicators of impairment. At each reporting date, the company must determine whether there are such indicators (IAS 36, P.12). Impairment indicators are divided into external and internal depending on where the source of the information is.

External sources of information

• during the period, the market value of the asset has decreased significantly more than expected over time or during normal use.
• significant changes .. in the technical, market, economic or legal environment in which the entity operates or in the market for which the asset is intended.
• market interest rates have increased during the period (hence the discount rate used in calculating value in use has increased)
• the book value of the company's net assets exceeds its market capitalization (in other words, the company's value in the financial statements has become more than the company's value on the stock exchange)

Internal sources of information

• signs of obsolescence or physical damage to the asset.
• significant changes .. have occurred during the period or will occur in the near future: the idle time of the asset, plans to discontinue or restructure the activity to which the asset belongs, plans to dispose of the asset before the previously planned date, and the reclassification of the asset's life from indefinite to definite.
• internal reporting indicates that the economic performance of the asset is worse or will be worse than expected.

Regardless of whether there is or is any indication of impairment, the following should be tested annually for impairment:

1. an intangible asset with an indefinite useful life,
2. an intangible asset that is not yet available for use (R&D),
3. goodwill acquired in a business combination.

Assets impairment test IFRS

An impairment test means determining the recoverable amount of an asset and comparing it with cost.

The recoverable amount of an asset is the higher of:

• The fair value of the asset less costs to sell
• The asset's value in use, which is the present value of the future cash flows to be received from the asset's use.

a) If the carrying amount is\u003e recoverable, then the asset is impaired. The excess is the impairment loss and is charged to either income statement or revaluation reserve.

b) If the book value< возмещаемой, то обесценения нет, и, следовательно, корректировок в отчетности тоже нет.

If the concept of fair value is more or less clear, then value in use is a new term that appears in IFRS with the introduction of the “Impairment of Assets” standard.

Asset use value

What is the recoverable amount? If you own an asset, then you can either use it or sell it. The decision of what to do with an asset depends on how many benefits (cash) you will receive in a particular case. In most cases, the value in use of an asset exceeds the fair value of its sale, so it is more profitable not to sell the asset, but to consume the economic benefits it generates. But if you do not know how to use the asset profitably, and the selling price is more attractive to you, then it would be better to sell it to someone who can get the most out of the asset.

Value in use is the present value of the asset's future cash flows.

To determine the value in use of an asset, you need to predict all the cash flows that you will receive from the asset in the future and so far. The phrase “all future flows” means that both cash inflows and cash outflows associated with both the use of the asset and its disposal in the future must be taken into account. For example, if you buy a second apartment for rent (and you have an apartment to live in), then the value of using this second apartment for you will be equal to the present value of future rent minus utility costs for the entire period of use plus the present value net cash flow from the sale of this apartment in the future.

Recoverable amount estimate - Standard must be read

IAS 36 pays great attention to the calculation of both recoverable amount in general and value in use in particular, since recoverable amount is the cornerstone of this standard.

To determine the fair value of an asset less costs to sell, refer to the standard. Please note that paragraphs 25-27 of IFRS 36 were removed with the release of IFRS 13, but they still remain in the Russian translation, which is published on the website of the Ministry of Finance, since the translation was made before the amendments to IFRS in relation to fair value.

Determining the value in use of an asset is an essential part of IAS 36. How to estimate future cash flows from an asset is described in 20 paragraphs of the standard and 4 more paragraphs are related to the choice of the discount rate. In addition, there is Appendix A that explains how to discount expected cash flows to calculate value in use. This application is translated into Russian. Unfortunately, this is where the translation into Russian ends. The original IAS 36 also contains Appendix C, Basis for Conclusions and Illustrative Examples, and all three of these untranslated parts are not inferior in scope to the part of the standard that was translated into Russian.

If you happen to evaluate the recoverable amount of an asset for an impairment test in IFRS, then you will have to carefully read everything that is written about this in IAS 36. In this case, you will be able to assess how time-consuming it is, and why not every impairment test is performed the reporting period, but only if there is an indication that the asset is impaired.

Translation of IFRS 36 is posted on the website of the Ministry of Finance. It can be found at the link:

http://www.minfin.ru/ru/perfomance/accounting/mej_standart_fo/docs/

Illustrative task of calculating asset impairment

Alpha reviewed its assets for impairment. There is reason to believe that the cost of some production equipment has irreversibly decreased. Products manufactured using this equipment were sold below cost. The carrying amount of the equipment at the end of the reporting period is $ 290,000 and the fair value less costs to sell is estimated at $ 120,000. The expected net cash flow from the use of this equipment over the next 3 years is $ 100,000 per year. For present value calculations, an interest rate of 10% should be used.

Is there equipment impairment in this case? How should it be reflected in Alpha's financial statements?

Decision

1) Since there are indications of equipment impairment (sale of products below cost \u003d economic performance of the asset is unsatisfactory), an impairment test should be performed.

2) Impairment test - comparing the carrying amount of production equipment with its recoverable amount.

2) The recoverable amount is the higher of the asset's fair value less costs to sell and its value in use.

4) Fair value less costs to sell is 120,000.

5) Value in use equals the present value of the asset's future cash flows - $ 248,685. The factor (coefficient) of discounting for 1, 2 and 3 years can be taken from, on the Dipfir exam these numbers will be given.

6) 248.685\u003e 120.000. Therefore, the recoverable amount is $ 248,685.

7) Therefore, Alpha should write down the asset to its value in use and recognize a loss of 41,315 (\u003d 290,000 - 248,685) in the income statement.

Dr Impairment loss CT fixed assets (equipment) - 41,315

• OFP: fixed assets - 248,685
• OSD: impairment loss - 41,315

IFRS 36 is one of the most voluminous IFRS standards and its consideration is impossible within the framework of one article - it would be too long. In this article, I have not touched on such issues: where are impairment losses reflected, what is a CGU, impairment of goodwill, reversals of impairment losses and disclosures. I plan to do this in the following publications.

The fair value of any of the assets of a commercial company cannot be static. Some assets under the influence of macroeconomic factors rise in price, while others undergo a process of depreciation over time. In a general sense, the concept of asset depreciation is a multi-stage process of reducing its financial and economic potential, reducing its liquidity and profitability in excess of the cost reduction as a result of depreciation and inflationary factors. This may result in the asset's carrying amount being in excess of the theoretical consideration expected to be received from the sale of the asset in the fair value market.

In order for companies to be able to check their assets for impairment and correctly reflect these processes in their financial statements, IAS 36 applied standard was developed, which will be discussed in this article.

IAS 36 - General

IAS 36 is designed as a regulation that defines the accounting treatment of the assets of a commercial company in such a way that the amount of the balance sheet estimate does not exceed the fair value of the asset. At the same time, it is customary to recognize the excess of the book value not only as the excess over the selling price, but also the excess over the total amount of economic benefits and income that the company can derive from the use of this asset. When there is such a moment in relation to the financial value of the asset, such an event indicates that the asset has depreciated, and then, in accordance with IAS 36, the company must reflect its impairment loss (IM).

IAS 36 is used to measure / account for impairment of all assets of a commercial entity, regardless of type and market of use, except for those that are subject to other standards. For example, inventories, assets under construction contracts, investment property and some other categories of assets of commercial firms are excluded from the scope of IAS 36. However, IAS 36 applies to financial assets such as subsidiaries, associates and assets arising from joint ventures.

IFRS IAS 36 - application considerations

According to the logic of IFRS, an indicator of an asset's depreciation is the excess of its carrying amount of the theoretical consideration that could be received for it. When the financial management of a company determines that an asset is impaired, an immediate assessment of the asset and its recoverable amount is required. Here, regardless of whether a suspicion arises, at the end of each reporting period it is necessary to check for signs of impairment. If the identification of processes or signs of impairment is effective, the entity should investigate the asset's recoverable amount.

Companies are recommended (regardless of the macroeconomic situation and market factors) to annually assess the recoverable amount and the risk of impairment of intangible assets with indefinite service life in use. Such an audit can take place at any time annually, provided that it is performed at the same time each time. The initially recognized tangible asset must undergo a first audit for risks and signs of impairment with an estimate of recoverable amount no later than the end of the first annual period.

IAS 36 requires an entity to use all external and internal sources of information available to it that can assist in identifying indicators of impairment and assessing the recoverable amount of an asset.

External sources in accordance with IAS 36 include:

• A rate of decline in the value of an asset over the period at a rate significantly higher than expected from normal use;
• Technical, market, legal and economic conditions that have or are likely to begin to have a negative impact on the asset;
• Increases in market interest rates, rates of return on investment and other financial indicators that would adversely affect the discount rate used to mathematically calculate the value of the asset.

Internal data sources according to IAS 36 include:

• Changes in the company itself, which may result in organizational or financial changes that will have a negative impact on the asset;
• Physical damage, technical and moral obsolescence of an asset or a sharp change in the competitive advantages of similar assets of competitors;
• Changes in the actual use of the asset: plans for downtime, retirement plans, plans for disposal and other changes in the process of useful use of the asset;
• The appearance of signs or information that indicate a significant decrease in the productivity of the asset and its economic efficiency compared to estimates;
• The presence of a gap in financial flows relative to the asset, when the amount spent on the purchase and commissioning, as well as spent on the current operation of the asset, significantly exceeds the budget planned by the company;
• Deterioration of the actual data of the financial benefit from the use of the asset in comparison with the forecast and planned values \u200b\u200bin the absence of operational opportunities for the company to influence this situation;
• When assessing the benefits from using an asset in the forecast mode, the firm identifies the likelihood of a decrease in cash flows, profitability, operating profit, or, in general, the prospective formation of operating losses and net cash outflows.

This list of sources and factors is not complete. Depending on the organizational system of the firm itself, its management and accounting policies, any other indicators and metrics can be used that will help identify, assess and take into account the possible impairment of the firm's asset. Impairment testing, especially for goodwill factors, is an individual process for each individual company under consideration. Therefore, there is no single set of factors and processes that must be applied by all companies, without exception. However, IAS 36 describes the data sources listed above as preferential in the way they are accessed and recommends supplementing their estimates with any other material information that the company may use.

Each corporate asset is in its own way sensitive to market and economic changes, therefore, it is necessary to evaluate and analyze taking into account this assumption. Analytical work can show that the asset in question is not sensitive to the factors listed above and can only be assessed according to the individual system of indicators developed specifically for this asset. In this case, the firm needs to assess the importance of such an assessment for its own users of the statements and find a way to account for and assess the factors of impairment of such an asset.

The situation considered in this paragraph applies to a lesser extent to tangible assets and is more typical for intangible assets. Usually, individual metrics are required for all sorts of material, technical and intellectual assets, the accounting of which is, in principle, complicated, but cannot be excluded from the reporting of a company that is on the international system of financial reporting standards.

Companies are encouraged to be as rational as possible in accounting for impairment of assets and strive for the most balanced composition of data. For example, after estimating the amount of the market consideration, it becomes clear that the amount exceeds the carrying amount of the asset. If the excess is objectively consistent with market trends, then the firm should not overestimate the recoverable amount unless there is a reason to do so or there are factors and events that clearly require it. However, if the recoverable amount appears to be biased according to the market, then IAS 36 recommends additional analysis and revision of estimates using a different methodology.

Also, the occurrence / presence of indicators of assumed impairment may result from an incorrect assessment. This, in turn, can serve as an indicator demonstrating the need to make changes in accounting methods, depreciation, valuation and other parameters of the asset in order to bring the data to objectivity. According to IAS 36, the most correct set of data and the most professional approach to assessment will ensure the reliability and high value of such reports.

MA in accordance with IAS 36 recognizes the amount that has been identified as a result of a sequential process in which at the first stage it was determined that the recoverable amount was less than the carrying amount and then the carrying amount was adjusted to the recoverable amount. This difference (adjustment) is recognized by the MA. Any impairment loss to the firm is recognized in profit / loss immediately unless it is an asset with a revalued amount. Losses on a revalued asset are recognized in other comprehensive income in the amount of the revaluation surplus.

When the MA is greater than the carrying amount of the asset, the entity recognizes a liability incurred by it if required by another standard and the depreciation charge is adjusted for the remaining life of the asset. Upon recognition of the MA, current and deferred tax liabilities are re-determined by assessing the tax base based on the adjusted carrying amount.

Standard IAS 36 stipulates that the valuation of some assets is difficult due to the impossibility of their separate use. An example of such assets is the component parts of enterprises, additional equipment in assets and other values \u200b\u200bthat are inseparable from the main business. It is customary to consider such assets as part of the so-called cash-generating units, if there is no possibility of individual valuation of the asset. Even if all the economic benefits from a group of such assets are consumed by other cash-generating units (for example, in a production process), the group is still considered a separate cash-generating unit if the company can sell its products on the open market.

Any increase in the carrying amount of an asset (other than goodwill), if no MA has been recognized, is recognized as a revaluation. Such reversals are recognized immediately in profit or loss, and any reversals of losses on a revalued asset are recognized as increases in the revaluation amount and recognized in other comprehensive income of the company.

According to the requirements of IAS 36, a company must disclose in its financial statements all the necessary information regarding impairment of assets in order to enable users of the statements to draw the most rational management conclusions. Such information must clearly include:

• Assets affected by impairment and reversible from impairment;
• The amount of the PA recognized by the company in the period and in other comprehensive income;
• The amount of revalued MAs in the period and the amount of impairment losses on revalued assets;
• Substantial information regarding the nature of the events and circumstances that led to the recognition / restoration of the MA;
• Descriptions of the cash-generating units under consideration, in which assets are considered;
• The company is encouraged to disclose additional information regarding the asset valuation process.

Conclusions and conclusion

Accounting for impairment losses of a firm's assets is a complex process in the financial management system of a modern enterprise. The IAS 36 standard we have considered is an applied tool that defines a set of methods, a sequence of procedures and approaches necessary for the correct implementation of this process. Asset impairment data is certainly of great value for management and reporting users who want to assess the financial condition of the company and make a forward-looking forecast of the company's liquidity for the future.