This revised standard supersedes IAS 36 (1998) Impairment of assets and should be applied:

(a) on acquisition to goodwill and intangible assets acquired in business combinations for which the agreement date is on or after 31 March 2004.

(b) to all other assets, for annual periods beginning on or after 31 March 2004.

Earlier application is encouraged.

1. The objective of this Standard is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss. The Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures.

Scope

2. This Standard shall be applied in accounting for the impairment of all assets, other than:

(a) inventories (see IAS 2 Inventories);

(b) assets arising from construction contracts (see IAS 11 Construction Contracts);

(c) deferred tax assets (see IAS 12 Income Taxes);

(d) assets arising from employee benefits (see IAS 19 Employee Benefits);

(e) financial assets that are within the scope of IAS 39 Financial Instruments: Recognition and Measurement;

(f) investment property that is measured at fair value (see IAS 40 Investment Property);

(g) biological assets related to agricultural activity that are measured at fair value less estimated point-of-sale costs (see IAS 41 Agriculture);

(h) deferred acquisition costs, and intangible assets, arising from an insurer’s contractual rights under insurance contracts within the scope of IFRS 4 Insurance Contracts; and

(i) non-current assets (or disposal groups) classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

3. This Standard does not apply to inventories, assets arising from construction contracts, deferred tax assets, assets arising from employee benefits, or assets classified as held for sale (or included in a disposal group that is classified as held for sale) because existing Standards applicable to these assets contain requirements for recognising and measuring these assets.

4. This Standard applies to financial assets classified as:

(a) subsidiaries, as defined in IAS 27 Consolidated and Separate Financial Statements;

(b) associates, as defined in IAS 28 Investments in Associates; and

(c) joint ventures, as defined in IAS 31 Interests in Joint Ventures.

For impairment of other financial assets, refer to IAS 39.

5. This Standard does not apply to financial assets within the scope of IAS 39, investment property measured at fair value in accordance with IAS 40, or biological assets related to agricultural activity measured at fair value less estimated point-of-sale costs in accordance with IAS 41. However, this Standard applies to assets that are carried at revalued amount (ie fair value) in accordance with other Standards, such as the revaluation model in IAS 16 Property, Plant and Equipment. Identifying whether a revalued asset may be impaired depends on the basis used to determine fair value:

(a) if the asset’s fair value is its market value, the only difference between the asset’s fair value and its fair value less costs to sell is the direct incremental costs to dispose of the asset:

(i) if the disposal costs are negligible, the recoverable amount of the revalued asset is necessarily close to, or greater than, its revalued amount (ie fair value). In this case, after the revaluation requirements have been applied, it is unlikely that the revalued asset is impaired and recoverable amount need not be estimated.

(ii) if the disposal costs are not negligible, the fair value less costs to sell of the revalued asset is necessarily less than its fair value. Therefore, the revalued asset will be impaired if its value in use is less than its revalued amount (ie fair value). In this case, after the revaluation requirements have been applied, an entity applies this Standard to determine whether the asset may be impaired.

(b) if the asset’s fair value is determined on a basis other than its market value, its revalued amount (ie fair value) may be greater or lower than its recoverable amount. Hence, after the revaluation requirements have been applied, an entity applies this Standard to determine whether the asset may be impaired.