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Impairment of assets

Impairment of individual assets

1.1 Definitions

An asset is impaired if its recoverable amount is below its carrying
amount.

An asset’s recoverable amount is the higher of its:

 fair value less costs to sell

 value in use: the present value of cash generated by the asset

1.2 Indications of impairment

Indications of impairment may be either internal or external.

 Evidence of obsolescence/damage  Decline in market value

 Changes in asset use  Changes in environment: economic,
market, technological or legal

 Asset performance below  Increased interest rates, reducing
expectations value in use

1.3 Recognition and measurement

If impaired, an asset should be written down to its recoverable amount and the
impairment loss should be taken to the statement of profit or loss.

The only exception to this is where the asset has previously been revalued, in which
case the impairment will first be taken to the revaluation surplus, via other
comprehensive income. Any excess would then be taken to the statement of profit or
loss.

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