IAS 36 (Impairment of Assets)

The higher of an asset's (or cash generating unit's) fair value less costs of disposal and its value in use. Under IAS 36, an impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.

The period over which an intangible asset is expected to contribute to future cash flows, determining the duration of amortisation. Useful life may be finite (e.g., a patent term) or indefinite (e.g., a perpetually renewed trademark), and its estimation requires careful analysis of technological, legal, and competitive factors.

The mandatory annual assessment (and more frequent assessment when indicators exist) of whether the carrying amount of goodwill exceeds its recoverable amount. Under IAS 36, goodwill is tested at the cash generating unit level by comparing the unit's carrying amount (including allocated goodwill) with its recoverable amount.

A non-cash charge recorded when the carrying value of goodwill on the balance sheet exceeds its estimated recoverable amount. Goodwill impairment testing, required annually under IFRS and US GAAP, often signals that the intangible value anticipated at the time of acquisition — including synergies, customer relationships, and growth potential — has not been realised.

The process of determining the period over which an intangible asset is expected to contribute to the cash flows of an entity, which governs the amortisation period under IAS 38 and ASC 350. Useful life may be finite (based on contractual, legal, regulatory, technological, or economic factors) or indefinite (when there is no foreseeable limit to the period over which the asset will generate net cash inflows).

A reduction in the reported value of an asset on the balance sheet, typically triggered by impairment testing that reveals the asset's carrying amount exceeds its recoverable amount. Goodwill and other intangible asset write-downs often signal that the expected future benefits from a prior acquisition or investment have not materialised.

The price that would be received to sell an asset or cash generating unit in an orderly transaction between market participants (IFRS 13), less the costs of disposal. Under IAS 36, it is one of two measures used to determine the recoverable amount for impairment testing.

The US GAAP standard governing the recognition, measurement, and impairment of long-lived tangible and certain intangible assets. ASC 360 requires a two-step impairment test: first, a recoverability test comparing undiscounted future cash flows to carrying value; second, if impairment is indicated, measurement of the loss as the excess of carrying value over fair value.

What is the IAS 38 revaluation model for intangible assets?

IAS 38 permits revaluation of intangible assets to fair value if an active market exists, but this is rarely used in practice because active markets for most intangible assets do not exist.

What is the accounting treatment for intangible assets with indefinite useful lives?

Indefinite-life intangible assets are not amortised but must be tested for impairment at least annually under IAS 36. They include certain brands, trademarks, broadcasting rights, and perpetual licences with no foreseeable expiration.

What is the difference between amortisation and impairment of intangible assets?

Amortisation systematically allocates cost over the asset's useful life (predictable, planned). Impairment is an unplanned write-down triggered when the asset's carrying amount exceeds its recoverable amount.

What changed with ASU 2017-04 for goodwill impairment testing?

ASU 2017-04 simplified US GAAP goodwill impairment testing by eliminating Step 2 — companies now measure impairment as the excess of carrying amount over fair value of the reporting unit, without needing a hypothetical PPA.