Implementation issues concerning ias 36 "impairment of assets"

DURSUN, Nergis Nevruz. Implementation Issues Concerning IAS 36 ?Impairment of Assets?, Master Thesis, Ankara, 2007. Until the promulgation of IAS 36, there was very limited guidance available under international accounting standards to deal with the impairment of long-lived assets. IAS 36 that was applied firstly in 1999 and revised in 2004 sets out the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. According to IAS 36, an entity shall assess at each reporting date whether there is any indication that an asset may be impaired. If any such indication exists, the entity shall estimate the recoverable amount of asset. Irrespective of whether there is any indication of impairment, an entity shall also test an intangible asset with indefinite useful life or an intangible asset not yet available for use and goodwill acquired in a business combination for impairment annually by compairing its carrying amount with its recoverable amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. If this is the case, recoverable amount is determined for the cash-generating unit to which the asset belongs. The application of IAS 36 is not easy due in particular to the judgements and estimates that have to be made in assessing whether there are indications of impairment, in identifying cash generating units and determining the recoverable amount of assets. To ensure that entities apply IAS 36 as required, there are some kinds of measures to be taken by related parties including entities, audit firms and regulatory authorities.