Use of Fair Values in Impairment Testing

Authored by: Caroline Woodward

The Routledge Companion to Fair Value and Financial Reporting

Print publication date:  May  2007
Online publication date:  August  2012

Print ISBN: 9780415423564
eBook ISBN: 9780203815151
Adobe ISBN: 9781136713101


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IAS 36 is the standard that deals with impairment testing of most long-term non-financial assets such as property, plant and equipment and intangible assets. Under this standard an asset is impaired if its ‘recoverable amount’ is less than its carrying amount (the amount at which it is carried in the entity’s balance sheet). Recoverable amount is the higher of value in use and fair value less costs to sell. This chapter explores the differences between the two models and describes some of the practical challenges in applying the standard.

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