1. What is an impairment?
Impairment is a reduction in the value of a company asset such as a fixed asset or an intangible asset. An entity ensures that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the entity recognizes the same as an impairment loss.
2. Impairment Symptom (Ind AS 36):
3. Few Facts on Impairment
- The Objective of Ind AS 36 is to ensure that assets are carried at not more than at recoverable value
- Impairment loss =Recoverable Value- Carrying Amount
- Recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. That reduction is an impairment loss.
- If recoverable amount is more than carrying amount of an asset, then no impairment loss will be recognized
- Recoverable amount shall be higher of the following:
- Fair Value less cost of disposal
- Value in use
4. Standards referred while doing valuation for Impairment assessment:
5. Frequency of Impairment Assessment:
Impairment assessment should be done at regular interval based on internal & external indicators. Intangible assets with indefinite useful lives; intangible assets not yet available for use; and goodwill acquired in a business combination are to be assessed annually.
6. Key words generally referred during impairment assessment
- Carrying amount is the amount at which an asset is recognised after deducting any accumulated depreciation (amortisation) and accumulated impairment losses thereon.
- A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
- Costs of disposal are incremental costs directly attributable to the disposal of an asset or cash-generating unit, excluding finance costs and income tax expense.
- Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.
- An impairment loss is the amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable amount.
- The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use.
- Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.
Contact us for valuation of Company Assets:
Valecs Ecotech Pvt. Ltd.
Registration No.: IBBI/RV-E/02/2022/178
REGD OFFICE: OFFICE NO. 303, PLOT NO. 1
3RD FLOOR COMMUNITY CENTRE
ASHOK VIHAR PHASE-2; DELHI- 110052.
Mobile No.: 9868455181 | 9871918822
