# ACC411 - IMPAIRMENT IAS 36 (2021).doc - IAS 36 ACCOUNTING...

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IAS 36ACCOUNTING FOR IMPAIREMENTIAS 36Impairment of Assetsseeks to ensure that an entity's assets are not carried at morethan their recoverable amount (i.e. the higher of fair value less costs of disposal and value inuse). With the exception of goodwill and certain intangible assets for which an annualimpairment test is required, entities are required to conduct impairment tests where there is anindication of impairment of an asset, and the test may be conducted for a 'cash-generatingunit' where an asset does not generate cash inflows that are largely independent of those fromother assets.IAS 36 was reissued in March 2004 and applies to goodwill and intangible assets acquired inbusiness combinations for which the agreement date is on or after 31 March 2004, and for allother assets prospectively from the beginning of the first annual period beginning on or after31 March 2004.Impairments occur when a company's assets lose value. If the actual fair market value of anasset decreases less than the book value of an asset, then the asset is impaired. The fairmarket value is the value of the asset in a transaction between unrelated parties. The bookvalue of the asset is the amount the asset is worth on the company's financial statements.Impairments take the difference between the book value and fair market value and report thedifference as an impairment loss.1
Diagram 1: Determining recoverable amountCarryingAmountRecoverableAmountcompared withThe higher of:Fair value less costs to sellANDValue in useHere are some of the basic steps that business leaders use to identify and calculate assetimpairment for their business assets:Step 1Calculate the carrying value of the Non-current assets. This is equal to its acquisition cost,less its accumulated depreciation. Accumulated depreciation of fixed assets equals the sum ofthe annual depreciation expenses the company takes on the asset since the date of acquisition.

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Term
Spring
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Generally Accepted Accounting Principles