Allocation and Reversal of Impairment Losses (IAS 36)

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Last updated: 16 March 2020 If the recoverable amount of an asset is less than its carrying amount, the carrying amount must be reduced to its recoverable amount and the difference charged to P/L (or OCI for revalued assets). This is an impairment loss.  Following an impairment loss, subsequent depreciation charge is adjusted to reflect … Read more

Value in Use as the Recoverable Amount (IAS 36)

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Last updated: 30 March 2020 Value in use – overview Value in use (IAS 36.30-57) can be shortly defined as future cash inflows and outflows from continuing use of the asset and from its ultimate disposal, which are then discounted to reflect time value for money and risk. In practice, a single estimate of cash … Read more

Cash-Generating Units (CGU) (IAS 36)

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Last updated: 16 March 2020 Identification of cash-generating units – overview In most cases, companies do not test individual assets for impairment. Instead, IAS 36 requires assets to be combined into cash-generating units (‘CGU’) consisting of assets for which it is impossible to estimate the recoverable amount individually. This is the case when (IAS 36.67): … Read more

Interim Financial Reporting (IAS 34)

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Last updated: 14 May 2020 The purpose of interim financial statements is to provide an update on the latest annual financial statements. IAS 34 prescribes how to prepare interim financial statements under IFRS, but sets no requirements as to which entities should prepare them and how often. It is usually the requirement of local legislation … Read more

Financial Liabilities vs Equity (IAS 32)

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Last updated: 15 April 2020 Arguably the biggest challenge in applying IAS 32 is making the distinction between financial liabilities (definition) and equity (definition). Contractual obligation to deliver cash or other financial assets Impact on the classification A critical feature in differentiating a financial liability from an equity instrument is the existence of a contractual … Read more

Financial Instruments: Definitions (IAS 32)

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Last updated: 15 April 2020 Definitions essential in accounting for financial instruments are set out in IAS 32. Definition of a financial instrument A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity (IAS 32.11). ‘Contract’ and ‘contractual’ are … Read more