There are those terms that need extra explanation. IAS 36 is one of those. It is an impairment test. There are a number of things that are useful to know if you have to deal with this. In this article, you’ll read what you need to know about it.
What falls within the scope of IAS 36?
The impairment of telecom assets is covered by certain procedures that an entity must follow so that the assets do not come in at the recoverable amount. This recoverable amount is the highest amount you should realize from the sale or use of the asset. Does the carrying amount exceed the recoverable amount? Then you must write down the asset and recognize an impairment loss.
The standard very helpfully describes the circumstances under which you must reverse an impairment loss. It also further describes disclosures about impaired assets. But also about impairment losses, reversing impairment losses, the important estimates and assumptions one uses in determining the recoverable amount of cash flow generating units. These units contain goodwill or intangible assets with indefinite lives.
Within the scope of IAS 36 are:
- Tangible
- Intangible assets including goodwill
- Financial assets, such as subsidiaries, associates and joint ventures
- There are also a number of items that are outside the scope, namely:
- Inventories
- Contract assets and the contract costs to obtain or perform a contract
- Investment properties
- Deferred tax assets
- Assets arising from employee benefits
- Non-current assets held for sale
- Disposal groups
- Biological assets at fair value less costs to sell
- Investment property
IAS 36 requires at least annual impairment testing of goodwill, other intangible assets with indefinite lives and those intangible assets that are not available for use. In addition, it requires that an impairment test has been performed for each asset at each reporting date if it appears to be impaired. Also called a triggering event.
For these triggering events, from IAS 36 there is a list of common indications of impairment from internal and external sources of information to consider. For example, increase in market interest rates, market capitalization that asset falls below book value or the economic performance of an asset that is worse than expected in the internal budget.
There are also other indicators for telecom companies that are covered by IAS 36. Such as the negative trends in performance indicators. For example network usage rates, number of customers, average revenue per use, customer turnover and gross cost per addition. But also the impact of changes in regulation and deregulation, technological developments that reduce the economic performance of an operating license, and market introductions of new competition.
Where can you find more information about IAS 36?
For more useful and interesting information about IAS 36, you should go to annualreporting.info. Here you will find several pages on this subject, but also on other rules. It is a handy website to save as a bookmark on your computer, so you can access it with a click. Surf quickly to the website. In the menu you will find the IFRS topics from A to Z. In total there are six pages on IAS 36. So you’ll always find answers to your questions. Handy, right? Don’t wait any longer and discover more about this subject.