Exchanges of assets INTANGIBLES

Chapter 13 – Impairment Page 160  understand the key principles relating to the identification and measurement of impairment;  understand in which circumstances and to what extent impairments can subsequently be reversed; and  apply IAS 36 knowledge and understanding in particular circumstances through basic calculations. 3 Objectives, Scope and Definitions of IAS 36 IAS 36 applies to all assets apart from those specifically excluded from the standard. It most commonly applies to assets such as property, plant and equipment accounted for in accordance with IAS 16 Property, plant and equipment and intangible assets accounted for in accordance with IAS 38 Intangible assets. The standard also applies to some financial assets, namely investments in subsidiaries, associates and joint ventures. Impairments of all other financial assets are accounted for in accordance with IAS 39 Financial instruments: measurement and recognition. [IAS 36.2] An entity is required to assess at each reporting date whether there is an indication that an asset is impaired. If such an indication is identified, the asset’s recoverable amount should be calculated and compared to its carrying amount. In addition, regardless of whether there have been any indicators of an impairment during the period, there are three specific situations where the recoverable amount of the asset should be assessed for impairment annually. The three scenarios are: [IAS 36.10]  where the entity has intangible assets that have been identified as having indefinite lives;  where the entity has an intangible asset that is not yet ready for use; and  where goodwill has been recorded as a result of a business combination. The impairment test in these circumstances may be carried out at any time during the period, provided that it is carried out at the same time each period. 4 Key Stages in the Impairment Process The stages in the process of identifying and accounting for an impairment loss are as follows: i assess whether there is an indication that an asset may be impaired. Note that if there is no such indication, then, subject to the exceptions listed above, no further action is required; ii if there is an indication of impairment, then measure the asset’s recoverable amount; and iii reduce the asset’s carrying amount to its recoverable amount, usually by treating the loss as a separately disclosed expense.