Assessing the carrying value of your assets for impairment

IFRS requires an annual impairment review to be undertaken in respect of goodwill and other indefinite life assets. In addition, all other non-current assets must be assessed for impairment when there are indications of impairment. Such indications include:

  • current period losses and future estimated losses;
  • significant decrease in market values;
  • adverse changes in economic, technological or market conditions;
  • changes in legislation or regulation;
  • fundamental restructuring; and
  • loss of key personnel or customers.

Good news

IFRS does not require the annual impairment review to be undertaken at the reporting date.

So why wait until the year end and put additional pressure on your finance team?

By undertaking impairment reviews prior to the year end, you will give yourself more time to assess the appropriateness of your cash generating units, their associated cash flows, the discount rate and other judgemental assumptions behind the calculation, and ensure that your impairment models are mechanically correct and complete.

How can we help?

In order to prepare a detailed impairment review with underlying assumptions that are robust and supportable, we will work with you to understand:

  • how your business operates and generates cash flows;
  • what your strategic plan is and how it is to be executed;
  • how your business is financed; and
  • the risks associated with your current business model and future returns.

Examples of the services that we can deliver include:

  • assistance in determining your cash generating units;
  • assistance in reviewing your impairment models to confirm they comply with the relevant accounting requirements;
  • assistance with presenting the correct carrying value;
  • understanding the requirements of IAS 36 Impairment of Assets;
  • preparing detailed impairment calculations;
  • advice and/or assistance in determining an appropriate discount rate;
  • advice on allocating impairment losses;
  • advice and / or assistance in preparing associated financial statement disclosures; or
  • a detailed report to support the accounting treatment and valuations for audit purposes.

If you are interested in receiving some specialist advice please contact Danielle Stewart or Bart Sommerville.