Insights into IAS 36 - Estimating recoverable amount

IAS 36 ‘Impairment of Assets’ provides the guidance for carrying out impairment reviews of assets (both tangible and intangible). IAS 36 is not a new Standard, and while many of its requirements have been extensively commented on, IAS 36’s guidance is detailed, prescriptive and complex in some areas, and therefore frequently challenging to apply in practice.

The articles in our ‘Insights into IAS 36’ 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 IAS 36, and revisit some areas where confusion has been seen in practice.

The next three articles in our ‘Insights into IAS 36’ 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,
  and
• 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).

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