Accounting for impairment loss on long-lived assets under IFRS
Under IFRS, IAS 36, to be able to account for impairment of a tangible asset, this would be recorded when the asset’s carrying amount is more than the discounted present value of the asset’s expected future cash flow. Now if the carrying amount of an asset is more than its recoverable amount. Then there is an impairment loss and we should be able to recognize it. When we want to record the loss. IFRS provides two options for us. The first option is done when an organization may choose to record the impairment directly against the carrying amount. This is the same way it is done under GAAP. However, an organization may decide to record the impairment within a contra-asset account. No matter which option an organization may go with, the asset’s new fair value is amortized over its remaining useful life of the asset.
Impairment Reversal Under IFRS
Not like U.S. GAAP, here the reversal of a previously recorded impairment is allowed under IFRS. Impairment charges may be reversed if there are changes in the recoverable amount, economic status, or the use of the asset. Although impairments may be reversed, there is a limit on the amount an asset that can be written up for. A reversal may not be more than the carrying amount the asset would have had if no impairment loss had been recognized.
Goodwill Impairment Under IFRS
Under IFRS, to find out the impairment of goodwill, the test should be done at the cash generating unit level. We would have to compare the cash generating unit with its recoverable amount. Now we have to find out the amount of loss. This is accomplished by the amount in which the carrying value of the asset goes over its recoverable amount. Even though the IFRS does allow the reversal of impairment on some assets. Under U.S. GAAP, the reversal of goodwill is not allowed.
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