Asset impairment provision for energy storage assets

Does IAS 36 apply to impairment of assets?

IAS 36 Impairment of Assets is the Accounting Standard that describes the requirements for impairment testing of assets if not covered by other specific Accounting Standards. It can therefore be a little confusing deciding whether IAS 36 applies or not. IAS 36 does not apply

What happens if an asset is impaired?

If an asset is carried at more than its recoverable amount, the asset is described as impaired and the Standard requires the entity to recognise an impairment loss.

What are the timing requirements for impairment testing by asset type?

Timing requirements for impairment testing by asset type are as follows: Intangible asset not yet available for use. IAS 36, but not included above. and the asset’s residual value. IAS 36 requires an entity to assess at the end of each reporting period whether there is any indication that an asset or CGU may be impaired.

What happens if an asset's recoverable amount is less than its carrying value?

If an asset’s recoverable amount is less than its carrying value, then the asset is impaired and IAS 36 requires that an impairment loss is recognised. IAS 36 details the procedures that an entity must follow to ensure this principle is applied and is applicable for the majority of non-financial assets.

Is entity a's asset impaired?

Market interest rates and returns on investments in general have increased during the period, indicating that Entity A’s asset may be impaired (IAS 36.12(c)). Entity A’s management is considering if it needs to estimate the recoverable amount of its asset.

What needs to be reviewed if an asset is impaired?

If there is an indication that an asset may be impaired, this may indicate that the remaining useful life, the depreciation (amortisation) method or the residual value for the asset needs to be reviewed and adjusted in accordance with the Standard applicable to the asset, even if no impairment loss is recognised for the asset.