"FRS 36 (Impairment of Assets): Ensure that assets on the balance sheet are not carried higher than recoverable amounts; Includes assets under FRS 2, 11, 12, 19, 40, 41, 104, 105, 16, 38, 103, 27, 28, and 31; Need to assess and estimate recoverable amount of asset. If carrying amount exceeds recoverable amount, provide for impairment; Assess at reporting date for indication of impairment and consider internal and external factors; Recoverable amount is higher of ‘FV less costs to sell’ and ‘value in use’; FV is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; Value in use is the PV of estimate future cash flows expected to be derived from an asset; Determine recoverable amount for the cash generating unit (CGU) to which the asset belongs; CGUs are groups of assets that generates cash inflows which are independent from another group of assets; Impairment loss should hit P/L for assets at cost and revaluation decrease (equity) for assets at revalued amount; vice versa for reversals of impairment; For reversals of impairment, can only reverse to the extent that it does not increase the carrying amount of an asset above the carrying amount that would have been determined had no impairment loss been recognized in prior years; No reversal of goodwill impairment is allowed under FRS 36 because it is internally generated." - Marcus Chan
Posted on: Sun, 08 Sep 2013 08:14:33 +0000
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