5. IAS 36 Impairment of Assets

1. Introduction

1-2 Identifying Assets for Impairment [R]

2. Measuring recoverable amount

2-1 Measuring Recoverable Amount [I]

YouTube Video (11 minutes)

Notes PDF - FL022

Query: If both forced sale value and  fair value  are given then what will be used  for calculating impairment? and....if we get compensation for faulty asset after a year, what will be it's treatment?


1. Forced sales value (FSV) is not fair value and it is not used in any of the IFRS as acceptable measurement basis. Therefore, you will use fair value for calculating "fair value less costs of disposal" while applying IAS 36 requirements.

2. Compensation from third parties for items of property, plant and equipment that were impaired, lost or given up shall be included in profit or loss when the compensation becomes receivable. [IAS 16 Para 65]

2-2 Q&A Sky - Line Limited [O]

2-4 Q&A Hussain Associates Limited [O]

3. Recognition

3-1 Recognition  [I]

YouTube Video (11 minutes)

Notes PDF - FL023

Query: Sir Impairment loss and Reveluation loss different nhi hote Impairment has its own Standard IAS 36

Response: Impairment and revaluation are terms closely related to one another, with subtle differences. The calculation mechanism differs as in revaluation carrying amount is compared with fair value while in impairment carrying amount is compared with recoverable amount. However, same accounting entries method works for both and therefore these are often used interchangeably.

4. Comprehensive Examples

4-1 Q&A Zarmoney Limited (ICAP Autumn 2022) [I]

YouTube Video (13 minutes)

Notes PDF - FR183

Query: Sir risk free interest 8% nae tha leana?

Response: IAS 36 Para 55:

The discount rate (rates) shall be a pre‑tax rate (rates) that reflect(s) current market assessments of:

(a) the time value of money; and

(b) the risks specific to the asset for which the future cash flow estimates have not been adjusted.

The same concept discussed in our video lecture: https://www.youtube.com/watch?v=JuxGWPaRPcg

Query: Sir depreciation and tax payments ko inflows mein add kyun kia hai? Depreciation and tax payments ko ignore karte hain ias 36 mein?? Sir plz explain

Response: Yes. Depreciation and tax must be ignored. However, question stated that these are INCLUDED. So in order to REVERSE them we have to "ADD BACK" these amounts.

4-2 Q&A Barbary Cement Limited (ICAP Autumn 2021) [I]

4-3 Apricot Pakistan Limited (ICAP Autumn 2018) [I]

YouTube Video (10 minutes)

Notes PDF - FA044

Correction: It should be "Rs. million" instead of "Rs. 000" in working 1 Value in use.

4-6 Q&A Indus Pharma Limited (IPL) (ICAP Autumn 2020) [I]

YouTube Video (11 minutes)

Notes PDF - FA045

Query: Sir we have returned our grant then why amount on which dep is to be reflected is 630 so far

Response: Rs. 630 million is amount without deduction of grant (so return of grant means still this would be the amount). Alternatively, try to understand whole time line of carrying amount of plant as follows:

Year 1: 630 - 280 grant = 350 - 50 Depreciation = 300

Year 2: 300 - 50 Depreciation = 250

Year 3: 250 - 50 Depreciation = 200

Year 4: 200 - 50 Depreciation = 150

Year 5: 150 + 280 repayment of grant - 160 Additional depreciation = 270 - 90* = 180

*90 calculated as 270 / 3 years remaining life or 630 / 7 years original life

4-7 Q&A Monday Limited (ICAP Autumn 2019) [R]

4-8 Q&A Orchid Limited (ICAP Spring 2018) [X]

4-9 Q&A Sumerian Limited (ICAP Spring 2023) [I]

5. Objective Based Q&A