[et_pb_section bb_built=”1″ admin_label=”Header – All Pages” transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”||0px|” next_background_color=”#ffffff” custom_padding_tablet=”50px|0|50px|0″ custom_padding_last_edited=”on|desktop” global_module=”1221″][et_pb_row admin_label=”row” global_parent=”1221″ background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”on” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” title_all_caps=”off” use_border_color=”off” border_color=”#ffffff” border_style=”solid” title_font=”|on|||” title_font_size=”35″ custom_padding=”10px|||” parallax=”on” background_color=”rgba(255,255,255,0)” /][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”0px||0px|” padding_mobile=”on” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ prev_background_color=”#1e73be” next_background_color=”#ffffff” custom_padding_tablet=”0px||0px|” global_module=”1228″][et_pb_row global_parent=”1228″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” gutter_width=”3″ custom_padding=”0px||0px|” padding_mobile=”off” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ background_layout=”light” text_orientation=”left” text_font_size=”14″ use_border_color=”off” border_color=”#ffffff” border_style=”solid” background_position=”top_left” background_repeat=”repeat” background_size=”initial”]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”0px||0px|” custom_padding_last_edited=”on|desktop” prev_background_color=”#ffffff” next_background_color=”#000000″][et_pb_row][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.106″ open=”off” title=”Index”]Section 27 – Impairment of Assets
27.1.1 Extract from FRS102: Section 27.1 – 27.1A.
27.1.2 OmniPro comment – Objective and scope.
27.2 Impairment of inventories.
27.2.1 Extract from FRS102: Section 27.2 – 27.4.
27.2.2 OmniPro comment – Impairment of Inventories.
27.3 Impairment of assets other than inventories.
27.3.1 Extract from FRS102: Section 27.5 – 27.6.
27.4 Impairment – assessing if an impairment is required.
27.4.1 Extract from FRS102: Section 27.7 – 27.8.
27.4.2.1 Assessing if an impairment is required.
27.5.1 Extract from FRS102: Section 27.9 – 27.10.
27.5.2 OmniPro comment – Indicators of Impairment
27.6 Measuring recoverable amount
27.6.1 Extract from FRS102: Section 27.11 – 27.13.
27.6.2 OmniPro comment – Measuring recoverable amount
27.7 Fair value less costs to sell
27.7.1 Extract from FRS102: Section 27.14 – 27.14A.
27.7.2.1 Fair value less cost to sell – active market
27.7.2.2 Fair value less cost to sell – no active market – valuation model
27.7.2.3 Discount rate for fair value less cost to sell
27.8.1 Extract from FRS102: Section 27.15 – 27.20.
27.8.2.2 Estimating the future pre-tax cash flows.
27.8.2.4 Steps in calculating Value in Use.
27.8.2.5 Value in use – discount rate.
27.8.2.6 Value in use – terminal value.
27.9 Assets held for service potential
27.9.1 Extract from FRS102: Section 27.20A.
27.9.2 OmniPro comment – Asset held for service potential
27.10 Recognising and measuring an impairment loss for a cash-generating unit
27.10.1 Extract from FRS102: Section 27.21 – 27.23.
27.10.2.1 Allocation of the improvement loss in a CGU.
27.10.2.2 Restoration on reduction of assets as a result of impairment
27.11 Additional requirements for impairment of goodwill
27.11.2.1 – Impairment of Goodwill
27.12 Reversal of an impairment loss.
27.12.1 Extract from FRS102: Section 27.28 – 27.30.
27.12.2.1 Impairment reversals generally.
27.13 Reversal when recoverable amount was estimated for a cash-generating unit
27.13.1 Extract from FRS102: Section 27.31.
27.13.2 OmniPro comment – Reversal of impairment when recoverable amount based on CGU
27.14.1 Extract from FRS102: Section 27.32 – 27.33A.
27.14.2 OmniPro comment – Disclosures.
27.14.2.1 Tangible fixed assets accounting policy disclosure.
27.14.2.2 Extract from notes to the financial statements.
27.14.2.2.1 Exceptional item – impairment charge.
27.14.2.2.2Tangible fixed assets.
27.14.2.2.3 Extract from profit and loss where impairment is shown as an exceptional item.
27.14.2.2.4 Extract from notes to the financial statements
27.14.2.2.5 Extract from notes where impairment is not deemed exceptional
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27.2 Impairment of inventories
27.2.1 Extract from FRS102: Section 27.2 – 27.4
Selling price less costs to complete and sell
27.2 An entity shall assess at each reporting date whether any inventories are impaired. The entity shall make the assessment by comparing the carrying amount of each item of inventory (or group of similar items – see paragraph 27.3) with its selling price less costs to complete and sell. If an item of inventory (or group of similar items) is impaired, the entity shall reduce the carrying amount of the inventory (or the group) to its selling price less costs to complete and sell. That reduction is an impairment loss and it is recognised immediately in profit or loss.
27.3 If it is impracticable to determine the selling price less costs to complete and sell for inventories item by item, the entity may group items of inventory relating to the same product line that have similar purposes or end uses and are produced and marketed in the same geographical area for the purpose of assessing impairment.
Reversal of impairment
27.4 An entity shall make a new assessment of selling price less costs to complete and sell at each subsequent reporting date. When the circumstances that previously caused inventories to be impaired no longer exist or when there is clear evidence of an increase in selling price less costs to complete and sell because of changed economic circumstances, the entity shall reverse the amount of the impairment (i.e. the reversal is limited to the amount of the original impairment loss) so that the new carrying amount is the lower of the cost and the revised selling price less costs to complete and sell.
27.2.2 OmniPro comment – Impairment of Inventories
The impairment of inventories has been discussed in Section 13 of FRS 102. The key principal as outlined in Section 27.2 to 27.4 of FRS 102 is that an assessment is carried out at each reporting date to assess whether there are indicators of impairment. If indicators are present, the entity should write the stock down to estimated selling price less cost to sell. Indicators of impairment would include:
- Aged stock/slow moving inventory
- Excessive volumes of inventory
- Damaged stock
- Obsolescence of inventory due to changes in customer trends
- Plans to discontinue a product line.
Where circumstances which cause an impairment reverses, the inventory should be restated to its original cost or if lower the amount determined to be the recoverable amount.
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Examples
Example 1: Lowest available CGU.
Example 2: Lowest available CGU.
Example 3: A decline in the asset’s market value.
Example 4: Significant adverse changes that have taken/will take place in the market
Example 5: Change in assets use.
Example 6: Introduction of new competitor
Example 7: Impairment indicators – decision to close.
Example 8: Performance of an asset is worse than expected.
Example 9: Investment in subsidiary.
Example 10: Value in use differs from fair value less costs to sell
Example 11: Fair value less costs to sell
Example 12: Determining cash flow to include.
Example 14: Impairment loss for a CGU with goodwill
Example 15: Restriction of reduction of assets as a result of an impairment
Example 16: Impairment loss on a CGU with goodwill and non-controlling interests
Example 17: Reversal of impairment on an individual asset
Example 18: Reversal of cash generating unit
Example 19: extract from an accounting policy note and disclosure requirements.
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