Impairment test

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Financial reporting - impairment testing - international financial reporting standards (IFRS) - IAS 36.

Impairment testing is designed to ensure that the carrying amount of an asset (or Cash Generating Unit (CGU)) in a reporting entity's balance sheet does not exceed its recoverable amount.

The recoverable amount is the higher of:

  • Fair value less costs to sell the asset, and
  • Value in use

If the carrying amount is greater than the recoverable amount, an impairment must be recognised.

See also