uestion 3 IAS 36 Impairment of Assets requires that all asse

uestion 3 IAS 36 Impairment of Assets requires that all assets should be reviewed for impairment where appropriate and any impairment loss dealt with in the financial statements. The objective of IAS 36 is to ensure that assets are carried at no more than their recoverable amount, and to define how recoverable amount is determined. Required a) Describe what is meant by \'impairment and briefly explain the procedures that must be followed when performing an impairment review (8 marks) b) IAS 36 requires entities to determine the recoverable amount of an asset only if there is some indication that the asset might be impaired. State the external and internal indicators of impairment which should be considered (6 marks) c) A cash generating unit (CGU) has a carrying value of £190 million. An impairment review shows that the recoverable amount for the CGU is £130 million and that the patent has a market value of £25 million Before impairment, the carrying amounts of the assets in the cash generating unit were as follows Goodwil Patent Intangible assets Tangible assets £000 25,000 30,000 45,000 90,000 190,000 Required Calculate the impairment loss and show how this should be allocated between the assets

Solution

a) It is called that the asset is impaired when the carrying amount of an asset in the financial statements exceeds its value in use or recoverable value. This imbalance in values is impairement.

The procedure set out in IAS can be summed up as :

b) Internal factors :

External factors :

c)  

	Goodwill	Patent	Intengible Assets	Tengible Assets	Total
Carrying value	£   25.00	£ 30.00	£   45.00	£          90.00	£ 190.00
Impairment loss	-£ 25.00	-£    5.00	-£ 30.00	£                 -	-£   60.00
Carrying value after impairment	£          -	£ 25.00	£   15.00	£          90.00	£ 130.00
			Figures in Thousands