This document provides an overview of Ind AS 36 - Impairment of Assets. It begins with an agenda outlining the key topics to be covered, including objective and scope, definitions, recognition and measurement requirements, required disclosures, differences between Ind AS 36 and the corresponding Indian accounting standard AS 28, and the potential impact on ILGIC. Some of the main points covered include: assets within the scope of Ind AS 36, the definition of impairment and key terms, procedures for identifying and measuring impairment losses, impairment loss allocation methods, and additional annual testing required under Ind AS 36 for certain assets.

1. Prepared by Nitin S Poojary
1
Prepared by Nitin S. Poojary

2. Agenda
 Objective and Scope
 Key Definitions
 Disclosures
 Ind AS v/s AS

3.  Assets should be carried at no more than their
recoverable amount, i.e. the amount expected
to be recovered through use of the asset, or its
fair value less cost to sale.
 Specify procedures to be followed to ensure
that assets are not carried at more than
recoverable amount
 Specify when an impairment loss should be
reversed.
 Specify required disclosures.

4.  Applies to all assets except
 Inventories (Ind AS 2)
 Assets arising from construction contracts (Ind AS 11)
 Deferred tax assets (Ind AS 12)
 Financial assets (Ind AS 107)
 Assets arising from employee benefits (Ind AS 102)
 Investment property measured at fair value (Ind AS 40)
 Biological assets measured at fair value less estimated point-of
sale costs(Ind AS 41)
 Assets arising from insurance contracts (Ind AS 104)
 Non-current assets classified as held for sale (Ind AS 105)
 Applicable to impairment of financial assets like
subsidiaries, associates, joint ventures

5. Agenda
 Objective and Scope
 Key Terms
 Disclosures
 Ind AS v/s AS
 ILGIC Impact

6.  Impairment Loss
 Recoverable Amount
 Carrying Amount
 Fair Value less cost to sell
 Value in Use
 Cash Generating unit

7. EXTERNAL SOURCES INTERNAL SOURCES
 Significant decline in
market value
 Technological, market,
economic, legal
environment
 Increases in interest
rates or rates of return
 Lower market
capitalisation than
equity book value
 Evidence of
obsolescence or physical
damage
 Discontinuance,
disposal, restructuring
plans
 Asset performance
declining or expected to
decline

8. Assets are impaired when
Carrying amt (CA) > Recoverable amt (RA)
Assessment at the end of each reporting period
whether there are any impairment indicators.
If such indicators exist estimate the recoverable
amount of the assets.

9. Assessment at the end of each
reporting period whether there
are any impairment indicators
If such indicators exist
estimate the RA of assets
Assets impaired when
CA > RA
Annual impairment test whether
impairment indicators are
present or not
1) Intangible assets with
indefinite useful life
2) Intangible assets not
yet available for use
3) Goodwill in a business
combination
Any time within a
Reporting period
But consistent

10. Recoverable
amt = greater
of following
Value in use [VIU] = PV of
estimated future cash flows to
be derived from an asset/ CGU
continuing use & ultimate
disposal
Fair value less cost of sell =
(FVLCS) = Amt obtainable from
the sale of asset/ CGU in an
arm’s length transaction less of
costs of disposals

11.  Fair value is based on best available evidence, which is (from
most reliable to least):
 Binding sale agreement.
 Active market (current bid price).
 Best information available.
 Less costs of disposal, excluding
 Finance costs and income tax expense.
 Costs already recognised as liabilities.

12.  The calculation of value in use should reflect the following elements:
 an estimate of the future cash flows the entity expects to derive from the asset
 Expectations about possible variations in the amount or timing of those future
cash flows
 The time value of money, represented by the current market risk-free rate of
interest
 The price for bearing the uncertainty inherent in the asset
 Other factors, such as illiquidity, that market participants would reflect in
pricing the future cash flows the entity expects to derive from the asset
 Less costs of disposal, excluding
 Finance costs and income tax expense
 Costs already recognised as liabilities
PV of future cash flows.

13. Cash generating Unit
[CGU]
Smallest identifiable
group of assets.
That generates cash inflows
Largely
independent
from other
[groups of
assets]

14. 1. First to reduce the carrying amt of any goodwill allocated to
the CGU
2. Then to the other assets of the unit (group of units) pro rata
on the basis of the carrying amt of each asset in the CGU
3. After this allocation the carrying amt of an asset should not be
reduced below the highest of :
a. Its fair value less cost of disposal (If measurable)
b. Its VIU (If measurable)
c. Zero
4. These reductions in carrying amt shall be treated as
impairment losses on individual assets
5. If the recoverable amt of an individual asset cannot be
determined, no impairment loss is recognised for the asset if
the related CGU is not impaired. This applies even if the
asset’s FV less costs of disposal is less than its carrying amt.

15.  Initial allocation of goodwill to CGUs:
 Finalised before the end of the first annual reporting
period beginning after the acquisition date
 Completed on provisional basis before the end of the
reporting period in which acquisition took place
 Each unit or group of units shall:
 Represent the lowest level within the entity at which
goodwill is monitored for internal management purposes
 Not be larger than an operating segment
 Disposal of operations: goodwill allocated to the
carrying amount of the operation when calculating
gain/loss

16.  Yes
 No
 Yes
 No
CGU with GW,
intangible assets
with indefinite lives
or not available
for use
Asset / CGU
other than
above
Indication ?
Indication ?
Impairment Test
Impairment Test
(at least annually)
Impairment Test
Impairment Test
recent calculation
can be used if
criteria are met
any time within an
Annual reporting period
- consistency
- Initial recognition

17. Assess if impairment
loss may no longer
exist
Individual Asset
Reverse to the extent of
increase in RA and not
> CA in the absence of
impairment loss
Charge to P&L or
reserve
Adjust future
depreciation
Cash generating unit
Without GW With GW
No loss reversal on
goodwill
Allocate pro-rata with the CA of other assets

18. Agenda
 Objective and Scope
 Key Terms
 Disclosures
 Ind AS v/s AS
 ILGIC Impact

19.  Amount of impairment losses recognised /
reversed during the period in
 Income statement and
 Directly to equity
 If recognised in income statement disclosure of
where items are included
 Segment reporting information
 By category of asset
 Disclosures when impairment losses are material for an
individual asset
 Information on basis used for determining recoverable
amount
 Discount rate used.

20. Agenda
 Objective and Scope
 Key Terms
 Disclosures
 Ind AS v/s AS
 ILGIC Impact

21.  Reversal of Impairment Loss on Goodwill
 Reversal of impairment loss on goodwill is not permitted under
IND AS36.
 AS28 requires reversal of impairment loss on goodwill when
impairment loss was caused by a specific external event of
exceptional nature that is not expected to recur and subsequent
external events have occurred that reverse the effect of that
event
 Applicability to Discontinued Operations –
Impairment
 IND AS36 is not applicable to impairment on assets under
discontinuing operations which is covered under IAS 105 -
Non-current Assets Held for Sale and Discontinued Operations.
 AS-28 includes section on impairment in case of Discontinuing
Operations

22.  Impairment loss allocation
 Under IND AS36, impairment loss is first allocated to goodwill in a
cash-generating unit with balance allocated over other assets pro-
rata.
 Under AS28, for allocation of goodwill to a cash-generating unit,
bottom-up and then top-down test performed leading to
differences in measurement.
 Acquired & Internally generated intangibles
 Under IND AS36, irrespective of an indication of impairment,
annual impairment reviews are required for intangible assets with
indefinite useful lives and for assets not yet ready to use as well as
goodwill acquired in a business combination.
 Under AS28, annual impairment review is required for intangible
assets amortized over ten years from the date when the asset is
available for use and for assets not yet ready for use.

23. Agenda
 Objective and Scope
 Key Definitions
 Recognition and Measurement
 Disclosures
 Ind AS v/s AS
 ILGIC Impact