This article explains if and when a detailed impairment test as set out in MFRS 136 is required. The guidance prescribes different requirements for goodwill and indefinite life intangible assets (including those not ready for use) when compared to all other assets. As such, this article will cover Step3 in the impairment review which is to determine if and when to test for impairment is needed.
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MFRS 136 ‘Impairment of Assets’ prescribes the accounting for impairment reviews. While the guidance in this area has not changed in recent years, it still remains a challenging area to apply by preparers of financial statements.
The articles in our ‘Insights into MFRS 136’ series have been written to assist preparers of financial statements and those charged with the governance of reporting entities understand the requirements set out in MFRS 136, and revisit some areas where confusion has been seen in practice.
The next three articles in our ‘Insights into MFRS 136’ series cover Step 4 of the impairment review, namely estimating the recoverable amount.
We cover:
- Recoverable amount and fair value less costs of disposal
- Value in use – estimating future cash inflows and outflows
- Value in use – applying the appropriate discount rate
This article, covers the definitions of recoverable amount and fair value less costs of disposal (FVLCOD) and provides an overview of value in use (VIU).
How we can help
We hope you find the information in this article helpful in giving you some insight into MFRS 136. If you would like to discuss any of the points raised, please do not hesitate to contact us.
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This article, Scope and structure of MFRS 136, looks at the scope of the impairment review (i.e. the types of assets that are included) and how it is structured (i.e. the level at which assets are reviewed).
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MFRS 136 - Overview of the Standard
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