Financial Reporting and Ethics - The Institute of Chartered ...

ACCOUNTING STANDARDSactivity, non-current assets classified as held-for-sale, deferredacquisition costs under an insurance contract, assets arising fromemployee benefits, and assets arising from construction contracts.(b) IAS 36 requires an entity to carry out a review of its assets ateach balance sheet date to determine whether or not there isany indication that an asset may be impaired. If such indicationexists, the entity is required to estimate the recoverable amountof the asset. “Asset” in this context includes individual assetsand cash-generating units (CGUs).(c)Indications of impairment of assets may be obtained from twosources: internal sources and external sources.(i) External sources of information include:! significant unexpected decline in the market valueof an asset;! significant adverse changes that have taken place,in the technological, market, economic or legalenvironment in which the entity operates;! increase in market rates or market rate of returnon investments that are likely to decrease theassets recoverable amount materially; and! the carrying amount of the net assets of the entitybeing more than its market capitalization.(ii)Internal sources of information include:! evidence of obsolescence or physical damage ofan asset;! significant reduction concerning the extent towhich an asset is used or is expected to be used;! evidence that the economic performance of an assetis, or will be, worse than expected.(d)(e)Whether or not there is any indication of impairment, an entityis required to:(i) test an intangible asset with an indefinite useful life onan annual basis;(ii) test goodwill acquired in a business combination forimpairment annually.IAS 36 defines recoverable amount of an asset or a cashgeneratingunit (CGU) as the higher of:(i) the asset’s or CGU’s fair value less cost of selling;(ii) its value in use.If either of these amounts is greater than the asset’s carryingvalue, the asset is not impaired and it is not necessary to estimatethe recoverable amount.103