Impairment Testing

Impairment Testing

Impairment Testing

The primary objective of conducting asset impairment tests is to ensure that assets are not carried in the statement of financial position at more than they are worth to the business.

This application helps management to reflect fair value of these assets to stakeholders.

When does an impairment testing need to be performed?

Pursuant to the International Financial Reporting Standards (IFRS), impairment testing is required:

  1. At each reporting date when there is an indication of a possible impairment (a triggering event), and
  2. Annually for the following assets, regardless of whether there is a triggering event:
    • Intangible assets with an indefinite useful life
    • Intangible assets not yet available for use
    • Assets to which goodwill acquired in a business combination has been allocated or re-allocated.

What are the assets subject to impairment?

According to the International Financial Reporting Standards (IFRS), there are two types of assets, which must be subject to impairment testing, according to the nature of the type of asset, as follows:

  1. Assets subject to IAS 36 such as:
    • land
    • buildings
    • machinery and equipment
    • investment property carried at cost
    • intangible assets
    • goodwill
    • investments in subsidiaries, associates, and joint ventures carried at cost
    • assets carried at revalued amounts under IAS 16 and IAS 38
  2. Assets which are subject to IAS 39 such as:
    • Financial assets at fair value through profit or loss
    • Available-for-sale financial assets

 Added value to business entities from Impairment Testing Services

  • Comply with the requirements of IFRS;
  • Provide stakeholders with accurate information reflecting fair value of assets and hence help them make informed decisions; and
  • Maintain transparency and promote the business entity’s reputation.

 Services provided by Baker Tilly

  1. Full impairment testing
  2. A review of impairment testing report which is prepared in-house by the management

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