Article : Guidelines On The Application Of International Accounting Standard (IAS) 36: Impairment Of Assets

Title

Guidelines On The Application Of International Accounting Standard (IAS) 36: Impairment Of Assets

Author

Ephraim Hudson Mazvidza Matavire, Tawanda Dzama

The objective of IAS36 is to ensure that assets are not shown in the statement of financial position at amounts that exceed what could be obtained either from continued use of the asset or from a sale between an informed and willing seller and buyer, in an arm’s length transaction. The standard requires that each entity assess if there are indications of impairment of assets on an annual basis. If there are such indications, the entity then determines the recoverable amounts of the respective assets. Where the recoverable amount is less than the carrying amount, the asset is said to be impaired. The difference between the carrying amount and the recoverable amount is an impairment loss which is written off the asset. This paper provides a step by step guide on the application of IAS 36, with the aid of examples.

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