IFRS Impairment Definition net, like, definition, carrying, impaired

torontoanalyst

Under IFRS, an asset is impaired if: carrying value > recoverable amount

Recoverable amount is defined as the greater of 'fair value less any selling costs' AND the 'value in use'.

Let's say an asset has:
carrying value = 95
net fair value = 100
value in use = 90

By the definition above, the asset is NOT impaired - is this correct?

Just would like to confirm my understanding that both the 'net fair value' AND 'value in use' has to be greater for the asset to be impaired. Thanks.

benbenxiong

Impairment recorded is excess of carrying value over recoverable amt. recoverable amt is greater of fair value less selling costs and present value of expected future cash flows from the asset (value in use).

In your example the asset is not impaired.

yodacaia

Thank you - that clears it up for me.

SeanWest

Thanks for providing an additional example.

The 'AND' in the Recoverable Amount definition above threw off initially. I understand now that if either the 'fair value - selling costs' or 'value in use' is greater than the carrying value the asset does NOT need to be impaired - only when both of them are below the carrying value the impairment applies - and as you have correctly stated the larger value of the two is the figure to use for the impairment adjustment.