(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009Internal sources of information(e)(f)(g)Evidence is available of obsolescence or physical damage of an asset.Significant changes with an adverse effect on the entity have taken placeduring the period, or are expected to take place in the near future, in theextent to which, or manner in which, an asset is used or is expected to beused. These changes include the asset becoming idle, plans to discontinueor restructure the operation to which an asset belongs, plans to dispose ofan asset before the previously expected date, and reassessing the useful lifeof an asset as finite rather than indefinite.Evidence is available from internal reporting that indicates that theeconomic performance of an asset is, or will be, worse than expected.In this context economic performance includes operating results and cashflows.27.10 If there is an indication that an asset may be impaired, this may indicate that theentity should review the remaining useful life, the depreciation (amortisation)method or the residual value for the asset and adjust it in accordance with thesection of this IFRS applicable to the asset (eg Section 17 Property, Plant andEquipment and Section 18 Intangible Assets other than Goodwill), even if no impairmentloss is recognised for the asset.Measuring recoverable amount27.11 The recoverable amount of an asset or a cash-generating unit is the higher of itsfair value less costs to sell and its value in use. If it is not possible to estimate therecoverable amount of an individual asset, references in paragraphs 27.12–27.20to an asset should be read as references also to an asset’s cash-generating unit.27.12 It is not always necessary to determine both an asset’s fair value less costs to selland its value in use. If either of these amounts exceeds the asset’s carryingamount, the asset is not impaired and it is not necessary to estimate the otheramount.27.13 If there is no reason to believe that an asset’s value in use materially exceeds itsfair value less costs to sell, the asset’s fair value less costs to sell may be used as itsrecoverable amount. This will often be the case for an asset that is held fordisposal.Fair value less costs to sell27.14 Fair value less costs to sell is the amount obtainable from the sale of an asset inan arm’s length transaction between knowledgeable, willing parties, less thecosts of disposal. The best evidence of the fair value less costs to sell of an asset isa price in a binding sale agreement in an arm’s length transaction or a marketprice in an active market. If there is no binding sale agreement or active marketfor an asset, fair value less costs to sell is based on the best information availableto reflect the amount that an entity could obtain, at the reporting date, from the160 © IASCF